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Bangladesh economics,Suggestion regarding enhancement of national income of  Bangladesh
 

Bangladesh economics,Suggestion regarding enhancement of national income of Bangladesh

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Bangladesh economics,Suggestion regarding enhancement of national income of Bangladesh

Bangladesh economics,Suggestion regarding enhancement of national income of Bangladesh

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    Bangladesh economics,Suggestion regarding enhancement of national income of  Bangladesh Bangladesh economics,Suggestion regarding enhancement of national income of Bangladesh Document Transcript

    • GROUP NAME: PORTFOLIO STUDENT NAME ID NUMBER E-MAILMD. MUSTAFIZUR RAHMAN (L) 09117602 mustafiz602@gmail.comMD. HASIBUL HASAN 09057679 Rubel679@yahoo.comMD. MAMUN MIAH 09017609 Mamunru78@gmail.comMD. MAMUDUL HASAN 09087671MASUD RANA 09087688 Masudru88@gmail.comASHIF KHAN 09017669 asifgsm@gmail.comMD. RUHUL AMIN KHAN 09057653ROKIB AHMED 09117710SHIFUL ISLAM 09117616MD. SAIFUL ISLAM 09097636MD. HASNAT RABBI 09037690
    • TABLE OF CONTENTSSUGGESTION FOR ENHANCEMENT OF NATIONAL INCOMEMETHODOLOGY…………………………………………………………….01PREFACE………………………………………………………………………01NATIONAL INCOME………………………………………………………..01INDICATORS OF NATIONAL INCOME ………..………………………………………01SECTOR WISE GROWTH OF GDP ………………………………………………………02SUGGESTIONS FOR ENHANCEMENT OF NATIONAL INCOME ………………..…02AGRICULTURE SECTOR ………………………………………………………………..02 CONTRIBUTION……………………………………………………………//……02 PROBLEMS………………………………...............................................................02 SUGGESTIONS ……………………………………................................................03FISHERY SECTOR ……………………………………………………………..…..…….03 CONTRIBUTION ………………………………………………………………….03 PROBLEM ……………………………………………………………………..…..03 SUGGESTION …………………………………………………………..…….……03MINING & QUARRYING ………………………………………………………………..04 CONTRIBUTION …………………………………………………….……………04 PROBLEMS …………………………………………………………………….….04 SUGGESTION ………………………………………………………………….….04INDUSTRY( MANUFACTURING) ……………………………………………………..04 CONTRIBUTION…………………………………………………………….…….04 PROBLEMS…………………………………………………………………………05ELECTRICITY, GAS & WATER…………………………………………………….……05 ELECTRICITY…………………………………………………………….………..05 GAS: ………………………………………………………………………………..05 WATER: ………………………………………………………………………….....05CONSTRUCTION: ………………………………………………………………………....05SERVICES SECTOR: ……………………………………………………….……………..05WHOLESALE AND RETAIL TRADE: ……………………………………….…………..06HOTEL AND RESTAURANT …………………………………………………………….06TRANSPORT, STORAGE AND COMMUNICATION SECTOR: ……………...………..06
    • SUGGESTION: ……………………………………………………………………………...06REAL ESTATE, RENTING AND BUSINESS ACTIVITIES SECTOR …………………..06OTHER SERVICES SECTORS: …………………………………………………………....06EDUCATION ……………………………………………………………………………....06PROSPECTIVE SECTOR OF BANGLADESH ECONOMY ……………………………..06GARMENT INDUSTRY: …………………………………………………………….……..06 OPPORTUNITY: …………………………………………………………………....07 SUGGESTIONS: …………………………………………………………………….07JUTE LOOKS TO WIN BACK SHINE: ………………………………………..……….….07SOFTWARE INDUSTRY: ………………………………………………………………….07PUBLIC-PRIVATE PARTNERSHIP (PPP):…………………………………………….….08 REASONS FOR PUBLIC-PRIVATE PARTNERSHIP: …………………………...08 THE PRIMARY BENEFITS OF USING PPP TO DELIVER SERVICES INCLUDE:……08 SECTORS OF PPP IN BANGLADESH: ………………………………….……….08TELECOM SECTOR IN BANGLADESH: ……………………………………………..….08SHIPBUILDING INDUSTRY: …………………………………………………………..….09TOURISM INDUSTRY: …………………………………………………………………….09SUGGESTION: ……………………………………………………………………..……….10OUTSOURCING: …………………………………………………………………………...10INVESTMENT ATTRACTIONS IN BANGLADESH: …………………………….…….10DEVELOPMENT OF HUMAN RESOURCES: ………………………………………...….10SOCIAL WELFARE ORGANIZATION: ……………………………………………..…...10EXPORT PROCESSING ZONE(EPZ): ……………………………………………..……...11FORMING PUBLIC LIMITED COMPANY FOR BASIC INDUSTRY: …………..…….11EXPANDING THE AREA OF FINANCIAL INSTITUTION: ……………………..…….11 POLICY RECOMMENDATIONS: ………………………………………….….….11DECENTRALISATION: ………………………………………………………………...….11POLITICAL STABILITY: …………………………………………………………….…….12IMPLEMENTATION OF BUDGET ............................................................………….…….12INCREASE INVESTMENT: ………………………………………………………….…….12CONCLUSION………………………………………………………………………………12
    • TAX-GDPBANGLADESH INCOME TAX RATES: ……………………………………………..…13BANGLADESH CORPORATE TAX RATES: …………………………………..………13MAIN FEATURES OF BANGLADESH TAX STRUCTURE: ………………….………141. TAX-GDP RATIO IS VERY LOW …………………………………………….………142. HEAVIER RELIANCE ON INDIRECT TAXES: ………………………………..……143. NARROWLY BASED TAX STRUCTURE: ………………………………………………154.LOW REVENUE PRODUCTIVITY AND HIGH ADMINISTRATIVE COSTS:…………………………………………………………………………………………….…15TAX EFFORT INDEX OF BANGLADESH : …………………..………………15DISTRIBUTION OF TAX BURDEN AMONG DIFFERENT CATEGORIES:…………………………………………………………………………………………….…15CORPORATE TAX PAYERS: ……………………………………………………….…16TAX HOLIDAY AND REVENUE LOSSES…………………………………..…………16TAX HOLIDAY CREATES DISTORTION IN TAXATIONMECHANISM……………………………………………………………………………16BLACK MONEY IS BEING LAUNDERED THROUGH THE MECHANISM OF TAXHOLIDAY ………………………………………………………………………………..…17REGISTRATION IN STOCK EXCHANGE AND ITS AFFECT ON TAX REVENUE …17PERSONAL INCOME TAX……………………………………………………………..…17NARROW TAX BASE………………………………………………………………………17INEQUALITY IN TAXING WAGES BETWEEN PRIVATE AND PUBLIC SECTOR…18CONCLUSION …………………………………………………………………………...…18
    • METHODOLOGY: Our assignment is “Suggestion for enhancement of nationalincome”. At first we have tried to identify the indicator of national income,then source of national income. We have explain contribution andproblem regarding the source of national income then we have tried tomention some suggestion regarding the sector to enhancement of nationalincome. We have mentioned some prospective sector which enhance thenational income of Bangladesh.PREFACE: Bangladesh has made significant strides in its economic sectorperformance since independence in 1971. Although the economy hasimproved vastly in the 1990s, Bangladesh still suffers in the area offoreign trade in South Asian region. Despite major impediments to growthlike the inefficiency of state-owned enterprises, a rapidly growing laborforce that cannot be absorbed by agriculture, inadequate power supplies,and slow implementation of economic reforms, Bangladesh has madesome headway improving the climate for foreign investors and liberalizingthe capital markets; for example, it has negotiated with foreign firms foroil and gas exploration, better countrywide distribution of cooking gas,and the construction of natural gas pipelines and power stations. Progresson other economic reforms has been halting because of opposition fromthe bureaucracy, public sector unions, and other vested interest groups. The especially severe floods of 1998 increased the flow ofinternational aid. So far the global financial crisis has not had a majorimpact on the economy. The World Bank predicted economic growth of6.5% for current year. Foreign aid has seen a decline of 10% over the lastfew months but economists see this as a good sign for self-reliance. Therehas been 18% growth in exports over the last 9 months and remittanceinflow has increased at a remarkable 25% rate.NATIONAL INCOME: National income measures the money value of the flow of output ofgoods and services produced within an economy over a period oftime.National income measures the total value of goods and servicesproduced within the economy over a period of time "National Income is the money value of all goods and servicesproduced in a country during a year" J.M. Keynes.INDICATORS OF NATIONAL INCOME:
    • – Gross Domestic Product (GDP) – Net Domestic Product – Gross National product (GNP) – Net National Product(NNP) – Income ConceptFor the measurement of national income, here we only consider the GrossDomestic Product(GDP). Let us see meaning of Gross DomesticProduct(GDP) • GDP measures the value of output produced within the domestic boundaries of the country. • GDP includes the output of the foreign owned firms with production plants located in the countrySECTOR WISE GROWTH OF GDP: Table: Shows the sectoral growth rate of GDP at constant prices for the fiscal year 2007-08 to 2009-10. The overall growth rate of GDP at constant price is 6.00 percent in FY 2009-10, which was 5.74 percent in FY 2008-09. Table : Sectoral Growth Rate of GDP at Constant Prices (Base Year: 1995-96)Sector/Sub-sector 2007-08 2008-09 2009-10 p1. Agriculture & Forestry 2.93 4.10 4.36 a. Crops & vegetables 2.67 4.02 4.22 b. Livestock 2.44 3.48 3.98 c. Forestry 5.47 5.69 5.892. Fishery 4.18 4.16 4.503. Mining & Quarrying 8.94 9.84 10.05a. Natural gas & crude petroleum 8.26 9.15 9.44b. Other mineral resources 10.01 10.90 10.974. Industry (Manufacturing) 7.21 6.68 5.92a. Large & medium-scale 7.26 6.58 5.64 b. Small-scale 7.10 6.90 6.615. Electricity, Gas & Water 6.77 5.91 6.98a. Electricity 6.68 5.39 6.93
    • b. Gas 7.72 8.42 8.15c. Water 6.00 8.39 5.296. Construction 5.68 5.70 6.817. Wholesale & Retail Trade 6.82 6.21 5.308. Hotel & Restaurant 7.55 7.58 7.629. Transport, Storage & Communication 8.55 8.01 7.20a. Surface transport 4.54 5.17 5.43b. Water transport 2.54 2.46 1.09c. Air transport 6.20 7.38 9.64d. Support transport services, storage 8.45 9.64 11.77e. Post & telecommunication 21.64 16.11 11.9210. Financial Intermediations 8.89 8.99 8.35a. Bank 8.38 9.05 7.69b. Insurance 10.03 8.38 9.92c. Others 12.47 11.13 11.9811. Real Estate, Renting & other 3.75 3.81 3.84Business Activities12. Public Ad. & Defense 6.21 7.01 14.9013. Education 7.80 8.05 11.1514. Health and Social Work 7.02 7.20 9.0515. Community, Social and Personal 4.62 4.70 4.74ServicesGrowth Rate (%) 6.19 5.74 6.00 Source: Bangladesh Bureau of Statistics. p- Provisional.SUGGESTIONS FOR ENHANCEMENT OF NATIONAL INCOME : AGRICULTURE SECTOR: We chose the topic agriculture transformation in Bangladeshbecause of its importance both practically and theoretically.CONTRIBUTION: This crucial sector accounts for about one fourth (20.16%) ofBangladesh’s Gross Domestic Product (GDP), and 63% of the nationalemployment. The GDP share of individual sub sectors are about 13% forcrops, 3% for livestock, 4.51% for fisheries and 5.89% for forestry.PROBLEMS:
    • Agriculture sector faces serious challenges posed by lowproductivity and the decline of land availability. The situation is furtheraggravated due to global warming scenarios. The per capita arable land isonly 0.05 ha. The rapid growth in population with the decline in cultivableland threatened to be a big problem for Bangladesh.SUGGESTIONS: Establishing Co-operative farming : Bangladesh is amixed economy. Land is primarily owned by the private individuals andwe do not have any system of cooperative farming. The farmers arehowever, dependant on the government for agricultural inputs like dieselfor irrigation, fertilizer, seeds, technology, warehouse etc. Otherwisefarmers do not get their suitable profit because of intermediaries| So co-operative farming is very much necessary. In cooperative farming thefarmer-member accepts all risks and benefits of production. As farmers getsuitable profit from farming, they become encouraged in farming. So thecontribution of agriculture sector in GDP will be increased as well asnational income will be increased. Increased productivity by supplying hybrid seeds,modern technology, fertilizer, irrigation, balance fertilizer, Implementation of “akti bari akti khamar” project.FISHERY SECTOR:CONTRIBUTION: Total inland and marine catches as estimated by the Directorate ofFisheries (DOF) will be 2.89 million metric tons in FY 2009-10 which was7.57 percent higher than that in the previous year. The fishery sector islikely to grow by 4.50 percent in FY 2009-10 compared with 4.16 percentin FY 2008-09. At constant prices the contribution of fishery sub-sector is4.51 percent to the total GDP of FY 2009-10.PROBLEM: Industrial Pollution: In Bangladesh, industries hardly make anyprovision handling effluents other than dumping them in the nearestavailable sources of water. Pollution by Agro-Chemicals :Another important source ofenvironmental degradation of fishery resources has been the increasing useof chemicals, like insecticides and pesticides, applied to boost riceproduction.
    • Decomposition of jute plants in water and aquatic pollution. theprocess of decomposition of jute plants creates effect on fish. Epizootic ulcerative disease of fish in epidemic form. Impact of flood control projects . Environmental degradation due to shrimp culture .SUGGESTION: From the point of view of biological diversity and sustainable ecologywe also have to keep our fisheries sector free from deterioration. Thefollowing recommendations are for the sustainable growth of fisheriessector from my part: Fish in the open land waters are “Common property Natural RenewableResources” to be sustained and optimized by the Government in thenationallevel. Water control structures should be designed in a manner thatwould allow fish migration, using knowledge of fish migration habits andtheir swimming abilities as hydraulic criteria. Replacement of lost fish production through construction offish hatcheries, stocking of fingerlings, creation and management of staticbodies etc, such external mitigation measures should be taken. A very well quantitative data of fisheries sector should be collected in order to develop, protect and enhance fisheries sector. Certain land and water resources which constitute unique, valuable, irreplaceable, or highly productive fisheries should be allocated for fisheries development and use . A partnership between the government and the NGOs should be developed to work together for the development of fisheries sector. (Reference: www.scribd.com/doc/30773816/Fisheries-of- Bangladesh )MINING & QUARRYING:CONTRIBUTION: Mining and quarrying sector is projected to grow at a rate of 10.05percent in FY 2009-10 which was 9.84 percent in FY 2008-09. Of this, thegrowth rate of natural gas & crude petroleum and other mining sub-sectorswould increase by 9.44 percent and 10.97 percent respectively in FY 2009-10 compared to 9.15 percent and 10.90 percent in the previous year.
    • PROBLEMS: Due to problems of inaccessibility to many parts of thecountry, 70% of the country has not been brought under geologicalsurveys. There is an acute shortage of trained professionals in thissector in both the Department and private mining organizations. There is a general absence of equipments, laboratoryinstruments and other physical facilities to undertake geo-scientificstudies. The existing laboratory is unsuitable for geological survey. Thereis neither a petro logical or mineralogical laboratory for mineralidentification and mapping, nor a geo-technical laboratory forenvironmental and hazard mapping studies. A lack of laboratoriesfacilities, drilling machines and other equipment has also affected theperformance of trained manpower that exists. A lack of legislation could lead to problems of environmentaldegradation, unsafe working conditions for the miners, unsystematicextraction methods etc. (Reference: www.gnhc.gov.bt/fyp/7thplan/07fyp_19.pdf)SUGGESTION: Government should solve the above problem. Governmentshould manage training facility for employers to operate the foreignmachineries. Mis-utilization should be stopped.INDUSTRY( MANUFACTURING):CONTRIBUTION: Production of large and medium scale manufacturing industries, inparticular readymade garments, knitwear, cotton textile, pharmaceuticals,plastic products, wood products, iron and steel, ceramic, cement,electronics goods, transport equipments etc showed moderate growth inthe first half of FY 2009-10. Readymade garments and knitwear showedsubstantial growth in the 1st and 2nd quarter of FY 2009-10 compared tocorresponding period of the previous year. But due to global recession it isassumed that the growth rate will decline in the1st half of FY 2009-10.
    • Small and cottage industries showed an upward trend in production duringthe first half of FY 2009-10 over the same period of the previous year.This sub-sector contributes about 25-30 percent of the total output of themanufacturing sector. The productions of this sub-sector mostly dependon indigenous raw materials and are generally immune to external shocks.It is expected that the small scale industries will attain 6.61 percent growthin FY 2009-10 compared to 6.90 percent in FY 2008-09.PROBLEMS: Without the proper laws the worker are demanding theirvarious wants and as a result conflict is began with the industry. Low working salary is another vital fact which makes the laborconflict. Worker made strike, layout to capture their demand. Some timebonus and the overtime salary are the important cause of crisis. Insufficient government policy about this sector is a greatproblem in Garments Company. Those are- lack of marketing tactics, absence of easily on-handmiddle management, a small number of manufacturing methods, lack oftraining organizations for industrial workers, supervisors and managers,autocratic approach of nearly all the investors, fewer process units fortextiles and garments, sluggish backward or forward blending procedure,incompetent ports, entry/exit complicated and loading/unloading takesmuch time, time- consuming custom clearance etc. We have no stablebranding. (Reference: www.scribd.com/doc/14270128)ELECTRICITY, GAS & WATER: A total of about 20045 million-kilowatt hours (Mkwh) of net energy(15,449 Mkwh in public sector and 10,966 Mkwh in private sector) weregenerated during FY 2009-10. The overall growth rate of the power, gasand water supply sector is expected to be 6.98 percent in FY 2009-10 ascompared to 5.91 percent in FY 2008-09.ELECTRICITY: Though the use of electric hitter is forbidden by constitution, it israpidly used in most universities and others. It causes miss-utilization ofelectricity. So it should be stopped immediately.GAS:
    • Government should stop miss-utilization of gas. Gas should beprovided to the household by miter system or by cylinder. According to British commissioner, Stifens Evans, “If it not possibleto overcome the crisis of electricity and gas, foreign investment will notincrease”. “On the development of Bangladesh economy there are twoobstacles-power and electricity” he added. So, government should solvethese problems.WATER: Transport cost by river is the most cheaper than the others. But waterway is declining day by day.CONSTRUCTION: Cement, iron and steel are the major inputs of the constructionsector. The domestic production of cement in the first six months of FY2008-09 is higher than that of the same period of previous year. Theconstruction sector is, therefore, projected to grow by 6.98 percent duringFY 2009-10 against 5.91 percent in FY 2008-09.SERVICES SECTOR: Total output of the services sector consists of the collective outputsof the wholesale and retail trade; hotel and restaurant; transport, storageand communication; financial intermediations; realestate, renting and business activities; public administration and defense;education; health and social work, and community, social and personalservices activities. The share of the services sector is 49.67 percent of thetotal GDP of FY 2008-09. Growth scenarios of the services sector for FY2007-08 are briefly as follows: WHOLESALE AND RETAIL TRADE: The output of this sector isestimated to grow at a rate of 6.35 percent in FY 2008-09 compared to6.82 percent in the previous year. In FY 2008-09 the GDP contribution ofthis sector is estimated at 14.44 percent.HOTEL AND RESTAURANT : In FY 2008-09 the growth rate of this sector is expected to increaseby 7.58 percent compared to 7.55 percent in the previous year.
    • TRANSPORT, STORAGE AND COMMUNICATION SECTOR: The transport, storage and communication sector is expected toachieve a growth rate of 7.20 percent in FY 2009-10. Post andtelecommunication services stood at the forefront with a growth of 15.24percent in FY 2008-09. The contribution of this sector is 10.76 percent inFY 2009-10 which is 0.11 percentage point higher than previous year.SUGGESTION: Government should developed rail way sector for the enhancementof national income. Road, land-port, sea-port should be developed.Government can give transit facility to the periphery country, only if theterms and conditions are favorable to national income.REAL ESTATE, RENTING AND BUSINESS ACTIVITIES SECTOR: The growth rate in this sector is provisionally estimated at 3.84percent in FY 2009-10 compared to 3.81 percent in FY 2008-09.OTHER SERVICES SECTORS: Among the other services sectors the growth rate of publicadministration and defence, education, and health and social services are14.90 percent, 11.15 percent and 9.05 percent .EDUCATION: It is need to be well educated to every person in any citizen. Beingeducated an individual can be skilled to perform economic activities. Thecurrent literacy rate of Bangladesh is about 35 percent. Bangladesh spendsonly 2 percent of its GNP on education where as an average incomecountry spends about 3.2 percent on education and high-income countriesspend 6 percent on education. About 40 percent of children never show upat school. Among those who enter primary school, only 40 percentcomplete it. A meager seven percent complete secondary school. So thegovernment should take proper steps to solve this problem.PROSPECTIVE SECTOR OF BANGLADESH ECONOMY:GARMENT INDUSTRY: The garment industry has played a pioneering role in thedevelopment of industrial sector of Bangladesh. Enriching the countryseconomy it has played a very important role in alleviating unemployment.At present there are more than two thousand one hundred garmentfactories in the country employing more than 12 lack labors. 85 percent ofthe labor force is women. After a bloody civil war resulting in the quick
    • demise of the garments industry of Sri-Lanka and India, the internationalbuyers and investors diverted their attention towards Bangladesh. As aresult the garments industry of Bangladesh expanded with unprecedentedsuccess. During the financial year. (Reference: http://www.oppapers.com/essays/Garment-Industry- Bangladesh/103316)OPPORTUNITY: EU is willing to establish industry in a big way as an option to chinaparticularly for knits, including sweaters. Bangladesh is included in theLeast Developed Countries with which US is committed to enhance exporttrade. Sweaters are very economical even with china and is the prospectfor Bangladesh If skilled technicians are available to instruct, prearrangedgarment is an option because labor and energy cost are inexpensive.Foundation garments for Ladies for the FDI promise is significant becauseboth, the technicians and highly developed machinery are essential forbetter competence and output. Japan to be observed, as conventionallythey purchase handloom textiles, home furniture and garments. Thissection can be encouraged and expanded with continued progress inquality.SUGGESTIONS: The exporters have to prepare themselves to harvest the advantagesoffered by the opportunities. Solve the followings weakness -lack ofmarketing tactics, the country is deficient in creativity, absence of easilyon-hand middle management, a small number of manufacturing methods,necessary of m/c advancement, the machinery required to assess add on agarment or increase competence are missing in most industries, lack oftraining organizations for industrial workers, supervisors and managers,autocratic approach of nearly all the investors, fewer process units fortextiles and garments, sluggish backward or forward blending procedure,incompetent ports, entry/exit complicated and loading/unloading takesmuch time, speed money culture, time-consuming custom clearance,unreliable dependability regarding delivery/qa/product knowledge,communication gap created by incomplete knowledge of English, subjectto natural calamities, political instability. (Reference: http://ezinearticles.com/?Overview-of-Bangladesh-Garment- Industry&id=367773)JUTE LOOKS TO WIN BACK SHINE: The higher demand for biodegradable jute goods points to acomeback of the golden days of the golden fibre in Bangladesh as people
    • across the globe now opt for an eco-friendly lifestyle, with natural fibresgradually replacing synthetics. The EPB data showed Bangladeshs exportearning from jute goods, marking 69.82 percent growth, stood at 377.09million U.S. dollars in the July-April period while during the same monthsraw jute export reached 170.41 million U.S. dollars, up 44.35 percent yearon year.SOFTWARE INDUSTRY: IT has good prospects in Bangladesh: It can widen the door formanpower export. Demand for Bangladeshi software has increasedsignificantly. A huge quantity of quality software is being produced in thecountry. The demand for software in the local market is worth over Tk 3.0billion (300 crore). About the performance of BASIS, Shams says hisorganization regularly exports software to 30 countries. In the first eightmonths of 2006-2007 fiscal, BASIS exported software worth about Tk 20million (2.0 crore) that is about 26 per cent higher compared to the sameperiod of the previous fiscal year. Bangladesh Economic Survey-2007states the country is exporting software and IT-enabled services to 30countries, including the USA, Japan, Canada, Australia and differentEuropean states. Over 50 software firms and IT companies are involved inthe export process. Currently, 48 organizations are working at the center.From this incubator, an amount of Tk 42.7 million (4.27 crore) was earnedin the last two years through export. According to experts, the main problems that are hinderingdevelopment of the industry include absence of duty-free facility in case ofsoftware export-import, problems relating to necessary infrastructure andmarketing, reluctance of government offices in using software, lack of IT-based educational institutions, inadequacy of teachers and labs, lack ofplanning and government support, reluctance of banks to provide loansand absence of software-related laws.If the existing problems could be resolved, this export-oriented industrycan open up a new horizon of prospects for national development. (Reference: http://www.thefinancialexpressbd.com/search_index.php?news_id=33144 &page=detail_news)PUBLIC-PRIVATE PARTNERSHIP (PPP): PPP is a contractual agreement formed between a public agency andprivate sector entity.PPP allows greater private sector participation in thedelivery of services and the public agencies to tap private sector technical,
    • management and financial resources to achieve certain public agencyobjectives such as:1. greater cost and schedule certainty,2. supplementing in-house staff,3. innovative technology applications,4. specialized expertise or access to private capital. REASONS FOR PUBLIC-PRIVATE PARTNERSHIP: Accelerating the implementation of high priority projects bypackaging and procuring services in new ways .Turning to the privatesector to provide specialized management capacity for large and complexprograms.THE PRIMARY BENEFITS OF USING PPP TO DELIVER SERVICESINCLUDE: Expedited completion compared to conventional delivery methods.Cost savings. Improved quality and system performance from the use ofinnovative materials and management techniques, Substitution of privateresources and personnel for constrained public resources and Access tonew sources of private capital. PPP contracts often include incentives thatreward private partners for mitigating risk factors. Promoting Public-Private Partnership in Bangladesh. Fast changing policy situation withglobalization and deregulation recognizes increasingly important role ofprivate sector in Bangladesh .Bangladesh has a very rich experience onPPP, especially in respect of the scope and diversity of Non-GovernmentOrganization (NGO) activities in social services .SECTORS OF PPP IN BANGLADESH: Health Sector, Education Sector, Infrastructure Development, Tourism Sector, ICT Sector, Industries,TELECOM SECTOR IN BANGLADESH: The almost exponential growth in the Telecoms sector inBangladesh in the last 5-10 years has had the same transformative impacton Bangladeshs economy as the growth of Ready Made Garments andRemittances. It is currently estimated that the 4-4.5 mn internet users inBangladesh, with 90% accessing the internet via mobile based delivery
    • systems such as GPs Edge and GPRS. In India, the top 5% of mobilesubscribers generate 25% of revenues, and large corporates are a majorproportion of that. We expect the greater maturity and sophistication ofBangladeshi companies to offer new opportunities to those Telecomscompanies that are able to offer customized products for marketing,distribution as well greater internationalization. It is estimated that formarket leader GP non—voice only constitutes 5% of revenue, we expectthis to increase rapidly.SHIPBUILDING INDUSTRY: Local shipbuilders, who have already made a mark in attractingforeign buyers, said Bangladesh has a marvelous opportunity to earnhuge foreign currency by building and exporting ."If the governmentpatronizes this prospective sector, it can play a significant role in givinga boost to the national economy." Managing Director of KarnaphuliShipbuilders Ltd Engineer MA Rashid said marine vessels, ferries, cruise-ships, fishing boats and launches are built in the countrys coastal beltand the offshore islands, but the potential of this sector still remaineduntapped simply for lack of visionary entrepreneurs, favorableatmosphere and government support."We can raise GDP (GrossDomestic Product) by at least 3 per cent within the next six years ifwere given a favorable environment," he said. It can create huge jobs atshipyards and its backward linkage industries. The annual turnover ofthe global shipbuilding industry is around US $ 1,522 billion. Europeanshipbuilders stopped taking orders until 2010, while Asian shipbuildersin Korea, Japan, China, Singapore, Malaysia and Vietnam have alreadyreceived adequate export orders. It is assumed that over US $ 300 billionworth of export still remain untapped and local ship-making companiescan grab this opportunity. It is satisfactory that our government hasapproved a principle about shipbuilding and announced shipbuilding asa industry.The cost of building an ocean-going ship in Bangladesh is around 15 percent less than in any other competitor countries, thanks to the cheap labor
    • here, a study of the Danish Embassy said Monday. According to theDanish study, the existing average labor wage per hour in Bangladesh isaround US dollar 1.5, compared to $ 3.0 in a Chinese shipyard, $ 8 inSouth Korea, $ 16 in Italy and $ 18 in the US. Bangladesh can supply only10 per cent of the components required for building an exportable ship, butits support to the domestic inland and coastal vessel manufacturing isaround 40 per cent, most of which is believed to be coming from small andmedium enterprises (SMEs).Bangladeshi shipbuilders are eying at least$100 million dollar proceeds from their overseas deliveries this year whichwill be a milestone in their efforts to build a billion-dollar ship exportindustry within the next few years.TOURISM INDUSTRY: By creating job opportunities tourism industry in Bangladesh canassist in the contribution towards the gross domestic product or the GDP. Foreign Visitors Arrival by Months (2007)Sl. Month Arrival Year1. Jan 16,733 20072. Feb 17,308 20073. Mar 17,579 20074. Apr 23,956 20075. May 20,853 20076. Jun 27,483 20077. Jul 32,223 20078. Aug 20,614 2007SUGGESTION: The different plans and projects are summed up as below: Conducting fairs on tourism. Arranging for seminars and workshops for making the people aware of the various services offered by the tourism industry. Proper step should be taken by govt. to ensure the security of the tourist.OUTSOURCING:The topic of IT outsourcing and freelancing was very little talked-about atthe national level, until Dhaka was ranked as the third largest outsourcingdestination in 2010, among all cities in the world, in a study conducted byoDesk Corporation. Animation spree, Bangladesh is going ahead with
    • Freelancers, Bangladesh is in the third position in Freelancing,Bangladesh upholds its merit to the world with numerous freelancers,bright future in freelancing in Bangladesh, Earn thousand dollars a dayfrom Bangladesh, freelance and Bangladesh, freelancing in Bangladesh,Freelancing in Bangladesh perspective, freelancing revolution, Homebased business in Bangladesh, Online earning tips and tricks, theanimation spree. So, the government should take proper step to take thefacility from the outsourcing. Bangladesh would take part in the CallCentre Expo to be held at Birmingham in the United Kingdom (UK) inorder to expand call centre business in the country. (Reference:www.wikimega.com/tag/bright-future-in-freelancing-in- bangladesh/) (Reference: http://www.thedailystar.net/newDesign/photo_gallery.php?pid=167623) INVESTMENT ATTRACTIONS IN BANGLADESH: Bangladesh is a winning combination with its competitive market,business-friendly environment and cost structure that can give you the bestreturns. Industrious low-cost workforce Bangladesh offers a well-educated, highly adaptive and industrious workforce with the lowestwages and salaries in the region. 57.3% of the population is under 25,providing a youthful group for recruitment. The country has consistentlydeveloped a skilled workforce catering to investor. So, foreign ministryshould take correct steps in this subject.DEVELOPMENT OF HUMAN RESOURCES: Government should provide proper training facility to improve labor efficiency.
    • Government should start vocational course in every educational institution. Government should provide education facility for every children of the country.SOCIAL WELFARE ORGANIZATION: It is not possible to enhance national income only by government.People of the country specially student should go ahead to overcome thesocial problems by forming social welfare organization. Like Songket,Badhan, Abodan etc.EXPORT PROCESSING ZONE(EPZ): For the enhancement of national income foreign investment isimportant. Since attracting foreign investment is the prime objective ofEPZ, so it is necessary to effective the all EPZ of Bangladesh. Governmentshould provide the following facilities- law & order situation ,infrastructure facilities, reduction of lead time, cost of doing business,friendly policy of govt, incentives, win – win ventures, success storysignatory of MIGA (Multilateral Investment Guarantee Agency),signatoryof ICSID (International Centre for Settlement of InvestmentDispute),member of WIPO (World Intellectual Property Organization),member of OPIC (Overseas Private Investment Corporation), asias lowcost production bas. (Reference: www.epzbangladesh.org.bd/bepza.php?id=why_inv_bd_EPZ)FORMING PUBLIC LIMITED COMPANY FOR BASIC INDUSTRY: For huge budget development purpose often we go to the foreigncountry or international financial organisation. But in most cases the termsand conditions of these foreign aid are unfavourable for our economy. Inthese cases government can form public limited company to finance therequired money from local capital market.EXPANDING THE AREA OF FINANCIAL INSTITUTION: Saving is the raw material of investment. But the savings rate ofBangladesh is very low. In FY 2008-09 the domestic and national savingsas percentage of GDP were 20.09 and 29.57 percent respectively. Clientsliving in local slums or village can commit to deposit 50,100, 200,300...1000 Taka per month. If we want to increase savings, financialinstitution must go to the root level .
    • Electronic banking or online banking is now one of the importantform of building digital Bangladesh. With the help of e-bankingcustomers can shop, pay bills, buy items at auction, and transfer moneyfrom anywhere at any time. As a result mobilization of economyenhanced.POLICY RECOMMENDATIONS: A well functioning e-banking network need availability of abackbone network connecting the whole country; reliable and secureinformation infrastructure including telecommunication infrastructure;ICT penetration in the banking sector; skilled operational personnel; andlegal and regulatory framework. (Reference: http://lsedatalibrary.blogspot.com/2010/09/new-microdata-on- personal-savings-in.html)DECENTRALISATION: To enhance national income every region of an country shouldinvolve in the economic circle. So, the government should decentralizetotal Bangladesh as economic zone. Government should finance separatelyaccording to the economic zone.POLITICAL STABILITY: Though there is all the characteristics of development of Bangladesheconomy, yet it has not reached to the basic meaning of developmentbecause of political violence. To overcome these problems, every politicalparties should sacrifice their individual selfishness for the ultimatedevelopment of Bangladesh economy.IMPLEMENTATION OF BUDGET: If we can make the implementation of budget, it is possible toenhance the national income.INCREASE INVESTMENT:
    • At the beginning of the nineties, the share of private investment intotal investment was about 60 percent, which stood at 80.84 percent in FY2008-09. An analysis of the investment data reveals that the contributionof public sector in total investment is gradually decreasing whilst thecontribution of private sector investment is gradually increasing.Following table show the year-wise investment as percentage of GDP forthe last few years. Investment as percentage of GDP 25 20 Total inve 15 Governme 10 Private inv 5 0 CONCLUCION: Bangledesh is still very prospective economy. We need properleading to effective this prospective. If every people work honestly with thesense of love to the country, Bangladesh may be in the serial of developedcountry within 20 years.BANGLADESH INCOME TAX RATES: Bangladesh personal income tax rates for assessment year 2010 -2011 is progressive up to 25%.Bangladesh Income Tax Rates for individuals other than female taxpayers,senior taxpayers of 65 years and above and retarded taxpayers -
    • Assessment Year 2010 - 2011First BDT 1,65,000 NilNext BDT 2,75,000 10%Next BDT 3,25,000 15%Next BDT 3,75,000 20%Rest Amount 25%Bangladesh Income Tax Rates for female taxpayers, senior taxpayers ofage 65 years and above Assessment Year 2010 - 2011First BDT 1,80,000 NilNext BDT 2,75,000 10%Next BDT 3,25,000 15%Next BDT 3,75,000 20%Rest Amount 25%Bangladesh Income Tax Rates for retarded taxpayers - Assessment Year2010 - 2011First BDT 2,00,000 NilNext BDT 2,75,000 10%Next BDT 3,25,000 15%Next BDT 3,75,000 20%Rest Amount 25%Minimum tax for any individual assessed is Tk. 2,000Non-resident Individual: 25% (other than non-resident Bangladeshi)On Dividend income: 20% Income tax is one of the main sources of revenue in Bangladesh. It isa progressive tax system. Bangladesh Income tax is imposed on the basisof ability to pay. The more a taxpayer earns the more tax he should pay.This is the basic principle of charging income tax in Bangladesh. The taxsystem aims at ensuring equity and social justice. Tax rates in Bangladeshalso differs between male and female individuals.BANGLADESH CORPORATE TAX RATES: The standard rate of corporate tax in Bangladesh is 27.5% in 2010 -2011 tax year. This is the standard corporate tax rate applicable to publicly
    • traded companies in Bangladesh, a list including tax rates for othercorporations are as follows:Publicly Traded Company 27.5%Non-publicly Traded Company 37.5%Bank, Insurance & Financial Company 42.5%Mobile Phone Operator Company 45%Publicly Traded Mobile Operator Company 35%If any publicly traded company (excluding Mobile Operator Company)declares more than 20% dividend, 10% rebate on total tax allowed.The general rate of Value Added Tax (VAT) in Bangladesh is 15%.National Board of Revenue (NBR) is the central authority for taxadministration inBangladesh and collects almost 75.37 percent of total revenue for thecountry, non tax revenue 20.88%, revenue beyond NBR 3.76%. (NBRAnnual Report, 2007). It was 78% in 2000.Tax revenue constitutes around 80 percent of total internal resources in thecountry. The NBR under the Internal Resources Division of the Ministryof Finance is the apex tax authority of Bangladesh and collects about 95percent of the country’s total tax revenue. The non-NBR portion of taxmainly includes narcotics duty, land revenue, non-judicial stamp,registration fee and motor vehicles tax.MAIN FEATURES OF BANGLADESH TAX STRUCTURE:1. TAX-GDP RATIO IS VERY LOWIn FY 1999-00, revenue/GDP ratio was 8.47 percent, which gradually roseto 10.79 percent in FY2005-06. In FY 2007-08 the revenue/GDP furtherrose to 11.17 percent and the increasing trend of revenue-GDP ratiofurther enhanced to 11.24 percent in FY2008-09. Table 1 shows tax andnon-tax revenue receipts and tax-GDP ratio during the period fromFY1999-00 to FY2008-09. As Table 1 shows, the tax GDP ratio inBangladesh is very low, it is less than 10%. Though tax-GDP ratio hasrisen from 5% in the early 1980s, it is still very low compared to even the
    • neighboring countries[1]. It is also lowest among the developingcountries[2]Table 1: Revenue as percentage of Gross Domestic ProductYear Total Revenue as % of Tax Revenue as % of Non-tax Revenue as % GDP GDP of GDP2000 8.47 6.78 1.692001 9.6 7.8 1.82002 10.21 7.81 2.42003 10.35 8.30 2.052004 10.63 8.5 2.132005 10.57 8.62 1.962006 10.79 8.70 2.092007 10.58 8.40 2.182008 11.30 8.96 2.342009 11.25 9.03 2.222010 11.5 9.3 2.20Source: Bangladesh Economic Review 2010, Ministry of Finance, Government ofBangladesh2. HEAVIER RELIANCE ON INDIRECT TAXES: Total taxes in Bangladesh are divided into direct and indirect taxes. Directtaxes in Bangladesh consist of taxes on income (income tax, corporationtax, agricultural income tax) and taxes on property (wealth tax, gift tax,estate duty, capital gains tax, urban property tax, house rent, land revenue,registration and non-judicial stamp). Like other developing countries,direct taxes contribute little to overall tax revenue in Bangladesh. As Table2 shows, around 75% of the total tax revenue in Bangladesh is comprisedof indirect taxes. The direct taxes in general accounted for less than afourth of the total tax revenue of the country. Traditionally, the taxstructure of Bangladesh is such that it has to rely on indirect tax forrevenue generation, which is discriminatory in nature[3].Table 2: Composition of Tax Revenue in Bangladesh FY Direct Taxes (%) Indirect Taxes (%) 2003 22.96 75.78 2004 22.04 76.88 2005 21.87 77.21 2006 22.95 76.20 2007 23.13 75.81
    • Source: NBR, cited from Bangladesh Bank, Working Paper Series: WP0715, June2007Among the indirect taxes, VAT constitutes 39 percent of total tax revenuefor FY09, followed by supplementary duty as shown in figure 1. Taxes onIncome and Profit occupies major share of direct taxes, with 26 percent oftotal tax revenue in FY09.The sources for such high growth of revenuecollection in the recent years are the increase in income tax and valueadded tax (VAT) at local stage which grew by 20.83% and 25.60%respectively.A slow move towards increasing the income tax is beingobserved recently. The proportion of tax is targeted at 29% and of VAT by35% in FY11. In an effort to improve the revenue scenario revenue tax-GDP and revenue-GDP ratio have been targeted to be to 9.3% and 11.6%respectively in FY11 as opposed to 8.8% and 11.5% respectively in FY10.Table 3: Composition of Tax Revenues in Bangladesh-FY 2008-09 Percentage Vat 39% Supplementary duty 16% Excise Duty 0% Income Tax 26% Other taxes and duties 1% Import Duty 18%Source: Bangladesh Economic Review 2010, Ministry of Finance, Government ofBangladesh3. NARROWLY BASED TAX STRUCTURE: Both direct and indirect taxes are quite narrowly based inBangladesh. For example, in direct taxes, agricultural land has not been abuoyant source of revenue as the rates have not been revised periodically(McCarten, 2005). A significant number of tax expenditure measuresexists in both direct and indirect taxes which creates an adverse impact onthe overall revenue effort.4.LOW REVENUE PRODUCTIVITY AND HIGHADMINISTRATIVE COSTS:
    • Empirical studies have found that poor logistics, lengthy procedures,unofficial payments, etc. of Bangladesh tax system lead to highadministrative costs and low revenue productivity (McCarten, 2005).TAX EFFORT INDEX OF BANGLADESH : Bangladesh is a lowest tax effort country among the developingcountries. According to a study[4] conducted by policy analysis unit ofBangladesh Bank found that Bangladesh as the lowest tax effort country inthe sample[5], with an average tax effort index[6] of 0.493. This hasimportant policy implications that Bangladesh and other countries havinglow tax effort (less than unity) are not utilizing their full capacity of taxrevenue, and therefore, have the potential for financing budgetaryimbalance through raising tax revenue. The tax effort index for both directand indirect taxes is below 0.6, implying that Bangladesh has the potentialfor raising revenue collection from both direct and indirect taxes. In termsof tax buoyancy[7], Bangladesh ranks the second highest among thesample countries, with a tax buoyancy ratio 1.235, meaning that taxrevenue is quite responsive to GDP and effort has been made to increasetax revenue over the period.Table 3: Index of direct and indirect tax effort of Bangladesh FY 2000-FY05 FY Direct Tax Effort Index Indirect Tax Effort Index 2000 0.614 0.468 2001 0.588 0.477 2002 0.612 0.504 2003 0.609 0.520 2004 0.56 0.540 2005 0.513 0.553Source: A Panel Study on Tax Effort and Tax Buoyancy with SpecialReference to Bangladesh, Lutfunnahar Begum, Policy Analysis UnitBangladesh Bank, Working Paper Series: WP0715, June 2007DISTRIBUTION OF TAX BURDEN AMONG DIFFERENTCATEGORIES: Taxpayers can be categorized into three main groups; corporate taxpayers, salaried tax payers and other tax payers. The elite group consists ofcorporate taxpayers, in terms of no. their percentage is very low. In 2000 itwas 3.02 percent, the salaried taxpayers share is about 18.81 percent and
    • the largest group consists of remaining all others and mainly those whohave income from business and profession is about 78.18 percent.CORPORATE TAX PAYERS: Corporate sector though has a poor number of taxpayers payingalmost major portion of total income taxes and the majority come fromsmall no. of foreign companies. The corporate tax in Bangladesh is 45%,in-fact it is effective 23.3%. According to marginal effective tax rate(METR), the METR for a 4 year tax holiday is 23.3 percent; it falls to 9.6percent for a holiday period of 8 years and to zero for 12 years. Besides, Ifany publicly traded company declares more than 20% dividend, 10%rebate on total tax is allowed.Table 4: Incidence of tax for company/corporate sector, FY2010-11 Type/category Tax rate Publicly traded company 27.5% Non-publicly traded 37.5% Bank, Insurance and Financial Company 45%Source: National Board of RevenueTAX HOLIDAY AND REVENUE LOSSES The existing tax law permits, extension unit of an industry to beentitled to tax holiday. Such facilities of granting tax holiday have beenfound ineffective. A mechanism of internal transfer pricing could be arisenas a vehicle for perpetual tax holiday. As observed, the present income taxact is full of rebates and exemptions (Hussain, 1999). It is now needed tominimize and to come straight to a threshold of income, which is taxable.The present scheme of granting tax holiday has not been a very goodexperience.Under the tax holiday, revenue loss arises from two mainsources. The first is direct loss due to exemption of company incomeduring the holiday period. The second is the loss due to the transfer ofprofits from companies under standard tax rules to companies benefitingfrom tax holidays. The transfer of profits has been commonly observed incountries where tax holidays are granted.The NBR has attempted toestimate the size of revenue forgone under tax holidays. A major problemwas encountered, however, as a large number of companies under taxholidays failed to file tax returns as required. Based on the partial dataavailable, the NBR placed the amount of tax revenue loss over a five-yearperiod (from FY1980 to 1984) at TK 40 million per annum. In an
    • alternative estimate by World Bank, the expected revenue loss is about TK126 million per annum[8].TAX HOLIDAY CREATES DISTORTION IN TAXATIONMECHANISMThe benefits of the tax holiday are being enjoyed mainly by the garmentindustries. Their growth has enhanced due to external factors. Even if theincentive of tax holiday were not given, the garment industry would havegrown up and the state would have earned quite a substantial amount ofrevenue from the industry. Thus the revenue foregone does not appear tobe fiscally efficient (Waresi, 1998). However this has not been able tofoster industrial growth in different regions of the country. Such aperpetuating provision for tax holiday creates distortion in taxationmechanism and against the norms of equity and neutrality. It is thusimportant to restrict such unbound opportunities for the sake of betterfuture of the country.BLACK MONEY IS BEING LAUNDERED THROUGH THEMECHANISM OF TAX HOLIDAY Under the present arrangement any income accruing from poultry,fishery, livestock etc. is exempted from income taxes until June 2011. Thisprovision is being abused indiscriminately. A lot of black money is beinglaundered into the market through this mechanism. One potential remedyshould be to allow an initial support to this sector then bringing back themunder the purview of taxation.REGISTRATION IN STOCK EXCHANGE AND ITS AFFECT ONTAX REVENUEIn case of Bangladesh, publicly traded companies or companies listed tothe stock markets usually enjoy some extra privileges. If any publiclytraded company declares more than 20% dividend, 10% rebate on total taxis allowed.It has been experienced in Bangladesh that a number of companies arereluctant in paying dividend to the shareholders so regularly rather retaintheir earning for tax purposes. As a result, not only the shareholders aredeprived, the general investors are also discouraged from investing incapital market. It seems government might has to use some tax instruments
    • to cope with such problem. It is really necessary to reduce the corporatetax rates to level for improved tax compliance and also to promoteinvestment and industrialization. The challenge is thus now to obtain anoptimal rate of taxes for the corporate sector that might not be hinderingthe countries economic growth.Secondly not all the companies invest equally in share market, in 2006 theBarger Bangladesh (a multinational company) got tax holiday TK 3.8crore only investing 5% primary share[9] and the rest of the companyinvested 20%[10].It was also found that a portion of privately owned companies paying notaxes for the government and showing negative income and revealed aslosses (13% in FY 2000).[11]PERSONAL INCOME TAXNARROW TAX BASE The present income-tax base of Bangladesh is one of the lowest evenamong the developing countries. Less than 1 percent of are within the taxnet. In case of personal income taxes, the burden is unevenly distributedamong the registered taxpayers. In reality a major portion of taxes is paidby a small group of people with higher marginal rates. A number ofregistered taxpayers always remain in lower income groups for either dueto mainly more available tax incentives or tax exemptions and share a littleburden of taxes often at lower marginal rates. In case of Bangladesh, suchtaxpayers are small and medium traders and manufacturers. A lot ofinvestment remains untaxed due to tax amnesty is a problem too forBangladesh. Substantial amount of taxpayers having business incomeremain in losses those are subject to set off for several years also remainoutside actual tax net. In that sense, the wage earners seems rightly taxedas such taxes are withheld by employer and paid by them[12].Table 5 : Incidences of personal Income Tax (FY 2011) Income Classification in % of payable tax for male % of payable tax for TK female First, 1,65,000/- Nil First, 1,80,000/- Nil Next 2,75,000/- 10% 10% Next, 3,25,000/- 15% 15% Next, 3,75,000/- 20% 20%
    • Rest Amount 25% 25%INEQUALITY IN TAXING WAGES BETWEEN PRIVATE ANDPUBLIC SECTOR: In Bangladesh, income tax for government employees is deemedpaid by their employer that is government. However, if a private employerpays income tax for its employees, such payments are considered income,which creates additional tax burden for the employee of the private firm.This seems discriminatory, that encourages employees of private firms toavoid or evade taxes. CONCLUSION Bangladesh is a low tax effort country having a high buoyancy ratio,implying that the policymakers of Bangladesh have the scope and potentialto opt for greater revenue mobilization through internal resources in orderto meet the budgetary deficit. There are unlimited tax exemptions and taxholidays, poor tax base, inequality of taxing, repeated tax amnesty etc.Therefore, it is important to place greater emphasis on administrativereinvention and policy reform in order to identify and remove theloopholes in the revenue generation process.2.1.2 Tax-GDP RatioFigure 2.1.2 shows the structural changes that took place in Bangladeshs revenuestructure with Secular decline in customs duty, from 2.6% in 1973-1980 to 1.8% ofGDP in 2006-08, due to openness of trade regime and the reduction in tariffs. In 1991,the VAT largely replaced the sales tax. The sales tax was 2.8% of GDP during 1981-90. Since then VAT increased gradually and stood on an average at 3% of GDP in
    • 2006-08.Average income tax-to-GDP ratio has increased from 0.8% in 1973-1980 to1.9 % in 2006-2008.The supplementary-to-GDP has increased from 0.9% from itsintroduction in 1991 to average around 1.5%.Increasing contribution of income taxand VAT would enable Bangladesh to meet the demand for increased domesticresources for larger investment to achieve higher growth.For details please see Appendix 2.1.22.1.3 Direct and Indirect Tax Ratio to Total Tax RevenueFigure 2.1.3 shows that:Indirect taxes (VAT, customs) represent the largest components of taxrevenues. It averagedaround 85% until the 2001-2005 period and currently represents about80% of the total taxrevenues. Up to the 1990s, the share of direct taxes, i.e. income tax wasbelow 15% of total tax revenues. It started to increase and crossed 20%mark during 2006-2008 period. However, it remains the lowest in thesouth Asian region.In the developed countries the share between direct to indirect tax is thereverse of what it is in Bangladesh.For generating desired level of domestic revenue to support economicgrowth, the share of direct taxes should increased.For details please see Appendix 2.1.3.2.1.4 Major Components of Direct Tax
    • Figure 2.1.4 shows the share of individual and corporate taxes of the totaldirect tax. Other types of direct taxes such as travel tax, electricity tax etcare not shown here. The key findings are:The growth of both individual and corporate taxes declined during 1991-2000 period compared to the previous decade, but increased for 2000-01period. However, during 2000-07 period growth in the individual incometax is higher than the corporatetax amid the expansion of the private sectorbusiness.