Bangladesh economics:SUGGESTION FOR ENHANCEMENT OF NATIONAL INCOME
Upcoming SlideShare
Loading in...5
×
 

Bangladesh economics:SUGGESTION FOR ENHANCEMENT OF NATIONAL INCOME

on

  • 932 views

Bangladesh economics:SUGGESTION FOR ENHANCEMENT OF NATIONAL INCOME

Bangladesh economics:SUGGESTION FOR ENHANCEMENT OF NATIONAL INCOME

Statistics

Views

Total Views
932
Views on SlideShare
932
Embed Views
0

Actions

Likes
2
Downloads
21
Comments
0

0 Embeds 0

No embeds

Accessibility

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Bangladesh economics:SUGGESTION FOR ENHANCEMENT OF NATIONAL INCOME Bangladesh economics:SUGGESTION FOR ENHANCEMENT OF NATIONAL INCOME Document Transcript

  • GROUP NAME: PORTFOLIO STUDENT NAME ID NUMBER E-MAIL MD. MUSTAFIZUR RAHMAN (L) 09117602 mustafiz602@gmail.com MD. HASIBUL HASAN 09057679 Rubel679@yahoo.com MD. MAMUN MIAH 09017609 Mamunru78@gmail.com MD. MAMUDUL HASAN 09087671 MASUD RANA 09087688 Masudru88@gmail.com ASHIF KHAN 09017669 asifgsm@gmail.com MD. RUHUL AMIN KHAN 09057653 ROKIB AHMED 09117710 SHIFUL ISLAM 09117616 MD. SAIFUL ISLAM 09097636 MD. HASNAT RABBI 09037690
  • TABLE OF CONTENTS SUGGESTION FOR ENHANCEMENT OF NATIONAL INCOME METHODOLOGY…………………… …………………… …………………. 01 PREFACE………… …………………… …………………… …………………0 1 NAT IONAL INCOME……………… … …………………… ……………….. 01 INDICATORS OF NATIONAL INCOME ………..………………………………………01 SECTOR WISE GROWTH OF GDP ………………………………………………………02 SUGGESTIONS FOR ENHANCEMENT OF NATIONAL INCOME ………………..…02 AGRICULTURE SECTOR ………………………………………………………………..02 CONTRIBUTION……………………………………………………………//……02 PROBLEMS………………………………...............................................................02 SUGGESTIONS ……………………………………................................................03 FISHERY SECTOR ……………………………………………………………..…..…….03 CONTRIBUTION ………………………………………………………………….03 PROBLEM ……………………………………………………………………..…..03 SUGGESTION …………………………………………………………..…….……03 MINING & QUARRYING ………………………………………………………………..04 CONTRIBUTION …………………………………………………….……………04 PROBLEMS …………………………………………………………………….….04 SUGGESTION ………………………………………………………………….….04 INDUSTRY( MANUFACTURING) ……………………………………………………..04 CONTRIBUTION…………………………………………………………….…….04 PROBLEMS…………………………………………………………………………05 ELECTRICITY, GAS & WATER…………………………………………………….……05 ELECTRICITY…………………………………………………………….………..05 GAS: ………………………………………………………………………………..05 WATER: ………………………………………………………………………….....05 CONSTRUCTION: ………………………………………………………………………....05 SERVICES SECTOR: ……………………………………………………….……………..05 WHOLESALE AND RETAIL TRADE: ……………………………………….…………..06 HOTEL AND RESTAURANT …………………………………………………………….06 TRANSPORT, STORAGE AND COMMUNICATION SECTOR: ……………...………..06
  • SUGGESTION: ……………………………………………………………………………...06 REAL ESTATE, RENTING AND BUSINESS ACTIVITIES SECTOR …………………..06 OTHER SERVICES SECTORS: …………………………………………………………....06 EDUCATION ……………………………………………………………………………....06 PROSPECTIVE SECTOR OF BANGLADESH ECONOMY ……………………………..06 GARMENT INDUSTRY: …………………………………………………………….……..06 OPPORTUNITY: …………………………………………………………………....07 SUGGESTIONS: …………………………………………………………………….07 JUTE LOOKS TO WIN BACK SHINE: ………………………………………..……….….07 SOFTWARE INDUSTRY: ………………………………………………………………….07 PUBLIC-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: ………………………………….……….08 TELECOM SECTOR IN BANGLADESH: ……………………………………………..….08 SHIPBUILDING INDUSTRY: …………………………………………………………..….09 TOURISM INDUSTRY: …………………………………………………………………….09 SUGGESTION: ……………………………………………………………………..……….10 OUTSOURCING: …………………………………………………………………………...10 INVESTMENT ATTRACTIONS IN BANGLADESH: …………………………….…….10 DEVELOPMENT OF HUMAN RESOURCES: ………………………………………...….10 SOCIAL WELFARE ORGANIZATION: ……………………………………………..…...10 EXPORT PROCESSING ZONE(EPZ): ……………………………………………..……...11 FORMING PUBLIC LIMITED COMPANY FOR BASIC INDUSTRY: …………..…….11 EXPANDING THE AREA OF FINANCIAL INSTITUTION: ……………………..…….11 POLICY RECOMMENDATIONS: ………………………………………….….….11 DECENTRALISATION: ………………………………………………………………...….11 POLITICAL STABILITY: …………………………………………………………….…….12 IMPLEMENTATION OF BUDGET ............................................................………….…….12 INCREASE INVESTMENT: ………………………………………………………….…….12 CONCLUSION………………………………………………………………………………12
  • TAX-GDP BANGLADESH INCOME TAX RATES: ……………………………………………..…13 BANGLADESH CORPORATE TAX RATES: …………………………………..………13 MAIN FEATURES OF BANGLADESH TAX STRUCTURE: ………………….………14 1. TAX-GDP RATIO IS VERY LOW …………………………………………….………14 2. HEAVIER RELIANCE ON INDIRECT TAXES: ………………………………..……14 3. NARROWLY BASED TAX STRUCTURE: ………………………………………………15 4.LOW REVENUE PRODUCTIVITY AND HIGH ADMINISTRATIVE COSTS: …………………………………………………………………………………………….…15 TAX EFFORT INDEX OF BANGLADESH : …………………..………………15 DISTRIBUTION OF TAX BURDEN AMONG DIFFERENT CATEGORIES: …………………………………………………………………………………………….…15 CORPORATE TAX PAYERS: ……………………………………………………….…16 TAX HOLIDAY AND REVENUE LOSSES…………………………………..…………16 TAX HOLIDAY CREATES DISTORTION IN TAXATION MECHANISM……………………………………………………………………………16 BLACK MONEY IS BEING LAUNDERED THROUGH THE MECHANISM OF TAX HOLIDAY ………………………………………………………………………………..…17 REGISTRATION IN STOCK EXCHANGE AND ITS AFFECT ON TAX REVENUE …17 PERSONAL INCOME TAX……………………………………………………………..…17 NARROW TAX BASE………………………………………………………………………17 INEQUALITY IN TAXING WAGES BETWEEN PRIVATE AND PUBLIC SECTOR…18 CONCLUSION …………………………………………………………………………...…18
  • METHODOLOGY: Our assignment is “Suggestion for enhancement of national income”. At first we have tried to identify the indicator of national income, then source of national income. We have explain contribution and problem regarding the source of national income then we have tried to mention some suggestion regarding the sector to enhancement of national income. We have mentioned some prospective sector which enhance the national income of Bangladesh. PREFACE: Bangladesh has made significant strides in its economic sector performance since independence in 1971. Although the economy has improved vastly in the 1990s, Bangladesh still suffers in the area of foreign trade in South Asian region. Despite major impediments to growth like the inefficiency of state-owned enterprises, a rapidly growing labor force that cannot be absorbed by agriculture, inadequate power supplies, and slow implementation of economic reforms, Bangladesh has made some headway improving the climate for foreign investors and liberalizing the capital markets; for example, it has negotiated with foreign firms for oil and gas exploration, better countrywide distribution of cooking gas, and the construction of natural gas pipelines and power stations. Progress on other economic reforms has been halting because of opposition from the bureaucracy, public sector unions, and other vested interest groups. The especially severe floods of 1998 increased the flow of international aid. So far the global financial crisis has not had a major impact on the economy. The World Bank predicted economic growth of 6.5% for current year. Foreign aid has seen a decline of 10% over the last few months but economists see this as a good sign for self-reliance. There has been 18% growth in exports over the last 9 months and remittance inflow has increased at a remarkable 25% rate. NATIONAL INCOME: National income measures the money value of the flow of output of goods and services produced within an economy over a period of time.National income measures the total value of goods and services produced within the economy over a period of time "National Income is the money value of all goods and services produced 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 Concept For the measurement of national income, here we only consider the Gross Domestic Product(GDP). Let us see meaning of Gross Domestic Product(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 country SECTOR 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 p 1. Agriculture & Forestry a. Crops & vegetables b. Livestock c. Forestry 2.93 2.67 2.44 5.47 4.10 4.02 3.48 5.69 4.36 4.22 3.98 5.89 2. Fishery 4.18 4.16 4.50 3. Mining & Quarrying a. Natural gas & crude petroleum b. Other mineral resources 8.94 8.26 10.01 9.84 9.15 10.90 10.05 9.44 10.97 4. Industry (Manufacturing) a. Large & medium-scale b. Small-scale 7.21 7.26 7.10 6.68 6.58 6.90 5.92 5.64 6.61 5. Electricity, Gas & Water a. Electricity 6.77 6.68 5.91 5.39 6.98 6.93
  • b. Gas c. Water 7.72 6.00 8.42 8.39 8.15 5.29 6. Construction 5.68 5.70 6.81 7. Wholesale & Retail Trade 6.82 6.21 5.30 8. Hotel & Restaurant 7.55 7.58 7.62 9. Transport, Storage & Communication a. Surface transport b. Water transport c. Air transport d. Support transport services, storage e. Post & telecommunication 8.55 4.54 2.54 6.20 8.45 21.64 8.01 5.17 2.46 7.38 9.64 16.11 7.20 5.43 1.09 9.64 11.77 11.92 10. Financial Intermediations a. Bank b. Insurance c. Others 8.89 8.38 10.03 12.47 8.99 9.05 8.38 11.13 8.35 7.69 9.92 11.98 11. Real Estate, Renting & other Business Activities 3.75 3.81 3.84 12. Public Ad. & Defense 6.21 7.01 14.90 13. Education 7.80 8.05 11.15 14. Health and Social Work 7.02 7.20 9.05 15. Community, Social and Personal Services 4.62 4.70 4.74 Growth 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 Bangladesh because of its importance both practically and theoretically. CONTRIBUTION: This crucial sector accounts for about one fourth (20.16%) of Bangladesh’s Gross Domestic Product (GDP), and 63% of the national employment. The GDP share of individual sub sectors are about 13% for crops, 3% for livestock, 4.51% for fisheries and 5.89% for forestry. PROBLEMS:
  • Agriculture sector faces serious challenges posed by low productivity and the decline of land availability. The situation is further aggravated due to global warming scenarios. The per capita arable land is only 0.05 ha. The rapid growth in population with the decline in cultivable land threatened to be a big problem for Bangladesh. SUGGESTIONS: Establishing Co-operative farming : Bangladesh is a mixed economy. Land is primarily owned by the private individuals and we do not have any system of cooperative farming. The farmers are however, dependant on the government for agricultural inputs like diesel for irrigation, fertilizer, seeds, technology, warehouse etc. Otherwise farmers do not get their suitable profit because of intermediaries| So co- operative farming is very much necessary. In cooperative farming the farmer-member accepts all risks and benefits of production. As farmers get suitable profit from farming, they become encouraged in farming. So the contribution of agriculture sector in GDP will be increased as well as national 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 of Fisheries (DOF) will be 2.89 million metric tons in FY 2009-10 which was 7.57 percent higher than that in the previous year. The fishery sector is likely to grow by 4.50 percent in FY 2009-10 compared with 4.16 percent in FY 2008-09. At constant prices the contribution of fishery sub-sector is 4.51 percent to the total GDP of FY 2009-10. PROBLEM: Industrial Pollution: In Bangladesh, industries hardly make any provision handling effluents other than dumping them in the nearest available sources of water. Pollution by Agro-Chemicals :Another important source of environmental degradation of fishery resources has been the increasing use of chemicals, like insecticides and pesticides, applied to boost rice production.
  • Decomposition of jute plants in water and aquatic pollution. the process 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 ecology we also have to keep our fisheries sector free from deterioration. The following recommendations are for the sustainable growth of fisheries sector from my part: Fish in the open land waters are “Common property Natural Renewable Resources” to be sustained and optimized by the Government in the national level. Water control structures should be designed in a manner that would allow fish migration, using knowledge of fish migration habits and their swimming abilities as hydraulic criteria. Replacement of lost fish production through construction of fish hatcheries, stocking of fingerlings, creation and management of static bodies 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 10.05 percent in FY 2009-10 which was 9.84 percent in FY 2008-09. Of this, the growth rate of natural gas & crude petroleum and other mining sub-sectors would 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 the country, 70% of the country has not been brought under geological surveys. There is an acute shortage of trained professionals in this sector in both the Department and private mining organizations. There is a general absence of equipments, laboratory instruments and other physical facilities to undertake geo-scientific studies. The existing laboratory is unsuitable for geological survey. There is neither a petro logical or mineralogical laboratory for mineral identification and mapping, nor a geo-technical laboratory for environmental and hazard mapping studies. A lack of laboratories facilities, drilling machines and other equipment has also affected the performance of trained manpower that exists. A lack of legislation could lead to problems of environmental degradation, unsafe working conditions for the miners, unsystematic extraction methods etc. (Reference: www.gnhc.gov.bt/fyp/7thplan/07fyp_19.pdf) SUGGESTION: Government should solve the above problem. Government should manage training facility for employers to operate the foreign machineries. Mis-utilization should be stopped. INDUSTRY( MANUFACTURING): CONTRIBUTION: Production of large and medium scale manufacturing industries, in particular readymade garments, knitwear, cotton textile, pharmaceuticals, plastic products, wood products, iron and steel, ceramic, cement, electronics goods, transport equipments etc showed moderate growth in the first half of FY 2009-10. Readymade garments and knitwear showed substantial growth in the 1st and 2nd quarter of FY 2009-10 compared to corresponding period of the previous year. But due to global recession it is assumed that the growth rate will decline in the1st half of FY 2009-10.
  • Small and cottage industries showed an upward trend in production during the 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 the manufacturing sector. The productions of this sub-sector mostly depend on indigenous raw materials and are generally immune to external shocks. It is expected that the small scale industries will attain 6.61 percent growth in FY 2009-10 compared to 6.90 percent in FY 2008-09. PROBLEMS: Without the proper laws the worker are demanding their various wants and as a result conflict is began with the industry. Low working salary is another vital fact which makes the labor conflict. Worker made strike, layout to capture their demand. Some time bonus and the overtime salary are the important cause of crisis. Insufficient government policy about this sector is a great problem in Garments Company. Those are- lack of marketing tactics, absence of easily on-hand middle management, a small number of manufacturing methods, lack of training organizations for industrial workers, supervisors and managers, autocratic approach of nearly all the investors, fewer process units for textiles and garments, sluggish backward or forward blending procedure, incompetent ports, entry/exit complicated and loading/unloading takes much time, time- consuming custom clearance etc. We have no stable branding. (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) were generated during FY 2009-10. The overall growth rate of the power, gas and water supply sector is expected to be 6.98 percent in FY 2009-10 as compared to 5.91 percent in FY 2008-09. ELECTRICITY: Though the use of electric hitter is forbidden by constitution, it is rapidly used in most universities and others. It causes miss-utilization of electricity. So it should be stopped immediately. GAS:
  • Government should stop miss-utilization of gas. Gas should be provided to the household by miter system or by cylinder. According to British commissioner, Stifens Evans, “If it not possible to overcome the crisis of electricity and gas, foreign investment will not increase”. “On the development of Bangladesh economy there are two obstacles-power and electricity” he added. So, government should solve these problems. WATER: Transport cost by river is the most cheaper than the others. But water way is declining day by day. CONSTRUCTION: Cement, iron and steel are the major inputs of the construction sector. The domestic production of cement in the first six months of FY 2008-09 is higher than that of the same period of previous year. The construction sector is, therefore, projected to grow by 6.98 percent during FY 2009-10 against 5.91 percent in FY 2008-09. SERVICES SECTOR: Total output of the services sector consists of the collective outputs of the wholesale and retail trade; hotel and restaurant; transport, storage and communication; financial intermediations; real estate, renting and business activities; public administration and defense; education; health and social work, and community, social and personal services activities. The share of the services sector is 49.67 percent of the total GDP of FY 2008-09. Growth scenarios of the services sector for FY 2007-08 are briefly as follows: WHOLESALE AND RETAIL TRADE: The output of this sector is estimated to grow at a rate of 6.35 percent in FY 2008-09 compared to 6.82 percent in the previous year. In FY 2008-09 the GDP contribution of this sector is estimated at 14.44 percent. HOTEL AND RESTAURANT : In FY 2008-09 the growth rate of this sector is expected to increase by 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 to achieve a growth rate of 7.20 percent in FY 2009-10. Post and telecommunication services stood at the forefront with a growth of 15.24 percent in FY 2008-09. The contribution of this sector is 10.76 percent in FY 2009-10 which is 0.11 percentage point higher than previous year. SUGGESTION: Government should developed rail way sector for the enhancement of national income. Road, land-port, sea-port should be developed. Government can give transit facility to the periphery country, only if the terms and conditions are favorable to national income. REAL ESTATE, RENTING AND BUSINESS ACTIVITIES SECTOR: The growth rate in this sector is provisionally estimated at 3.84 percent 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 public administration and defence, education, and health and social services are 14.90 percent, 11.15 percent and 9.05 percent . EDUCATION: It is need to be well educated to every person in any citizen. Being educated an individual can be skilled to perform economic activities. The current literacy rate of Bangladesh is about 35 percent. Bangladesh spends only 2 percent of its GNP on education where as an average income country spends about 3.2 percent on education and high-income countries spend 6 percent on education. About 40 percent of children never show up at school. Among those who enter primary school, only 40 percent complete it. A meager seven percent complete secondary school. So the government should take proper steps to solve this problem. PROSPECTIVE SECTOR OF BANGLADESH ECONOMY: GARMENT INDUSTRY: The garment industry has played a pioneering role in the development of industrial sector of Bangladesh. Enriching the country's economy it has played a very important role in alleviating unemployment. At present there are more than two thousand one hundred garment factories in the country employing more than 12 lack labors. 85 percent of the labor force is women. After a bloody civil war resulting in the quick
  • demise of the garments industry of Sri-Lanka and India, the international buyers and investors diverted their attention towards Bangladesh. As a result the garments industry of Bangladesh expanded with unprecedented success. 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 china particularly for knits, including sweaters. Bangladesh is included in the Least Developed Countries with which US is committed to enhance export trade. Sweaters are very economical even with china and is the prospect for Bangladesh If skilled technicians are available to instruct, prearranged garment is an option because labor and energy cost are inexpensive. Foundation garments for Ladies for the FDI promise is significant because both, the technicians and highly developed machinery are essential for better competence and output. Japan to be observed, as conventionally they purchase handloom textiles, home furniture and garments. This section can be encouraged and expanded with continued progress in quality. SUGGESTIONS: The exporters have to prepare themselves to harvest the advantages offered by the opportunities. Solve the followings weakness -lack of marketing tactics, the country is deficient in creativity, absence of easily on-hand middle management, a small number of manufacturing methods, necessary of m/c advancement, the machinery required to assess add on a garment or increase competence are missing in most industries, lack of training organizations for industrial workers, supervisors and managers, autocratic approach of nearly all the investors, fewer process units for textiles and garments, sluggish backward or forward blending procedure, incompetent ports, entry/exit complicated and loading/unloading takes much time, speed money culture, time-consuming custom clearance, unreliable dependability regarding delivery/qa/product knowledge, communication gap created by incomplete knowledge of English, subject to 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 a comeback of the golden days of the golden fibre in Bangladesh as people
  • across the globe now opt for an eco-friendly lifestyle, with natural fibres gradually replacing synthetics. The EPB data showed Bangladesh's export earning from jute goods, marking 69.82 percent growth, stood at 377.09 million U.S. dollars in the July-April period while during the same months raw jute export reached 170.41 million U.S. dollars, up 44.35 percent year on year. SOFTWARE INDUSTRY: IT has good prospects in Bangladesh: It can widen the door for manpower export. Demand for Bangladeshi software has increased significantly. A huge quantity of quality software is being produced in the country. The demand for software in the local market is worth over Tk 3.0 billion (300 crore). About the performance of BASIS, Shams says his organization regularly exports software to 30 countries. In the first eight months of 2006-2007 fiscal, BASIS exported software worth about Tk 20 million (2.0 crore) that is about 26 per cent higher compared to the same period of the previous fiscal year. Bangladesh Economic Survey-2007 states the country is exporting software and IT-enabled services to 30 countries, including the USA, Japan, Canada, Australia and different European states. Over 50 software firms and IT companies are involved in the export process. Currently, 48 organizations are working at the center. From this incubator, an amount of Tk 42.7 million (4.27 crore) was earned in the last two years through export. According to experts, the main problems that are hindering development of the industry include absence of duty-free facility in case of software export-import, problems relating to necessary infrastructure and marketing, reluctance of government offices in using software, lack of IT- based educational institutions, inadequacy of teachers and labs, lack of planning and government support, reluctance of banks to provide loans and absence of software-related laws. If the existing problems could be resolved, this export-oriented industry can 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 and private sector entity.PPP allows greater private sector participation in the delivery of services and the public agencies to tap private sector technical,
  • management and financial resources to achieve certain public agency objectives 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 by packaging and procuring services in new ways .Turning to the private sector to provide specialized management capacity for large and complex programs. THE PRIMARY BENEFITS OF USING PPP TO DELIVER SERVICES INCLUDE: Expedited completion compared to conventional delivery methods. Cost savings. Improved quality and system performance from the use of innovative materials and management techniques, Substitution of private resources and personnel for constrained public resources and Access to new sources of private capital. PPP contracts often include incentives that reward private partners for mitigating risk factors. Promoting Public- Private Partnership in Bangladesh. Fast changing policy situation with globalization and deregulation recognizes increasingly important role of private sector in Bangladesh .Bangladesh has a very rich experience on PPP, especially in respect of the scope and diversity of Non-Government Organization (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 in Bangladesh in the last 5-10 years has had the same transformative impact on Bangladesh's economy as the growth of Ready Made Garments and Remittances. It is currently estimated that the 4-4.5 mn internet users in Bangladesh, with 90% accessing the internet via mobile based delivery
  • systems such as GP's Edge and GPRS. In India, the top 5% of mobile subscribers generate 25% of revenues, and large corporates are a major proportion of that. We expect the greater maturity and sophistication of Bangladeshi companies to offer new opportunities to those Telecoms companies that are able to offer customized products for marketing, distribution as well greater internationalization. It is estimated that for market leader GP non—voice only constitutes 5% of revenue, we expect this to increase rapidly. SHIPBUILDING INDUSTRY: Local shipbuilders, who have already made a mark in attracting foreign buyers, said Bangladesh has a marvelous opportunity to earn huge foreign currency by building and exporting ."If the government patronizes this prospective sector, it can play a significant role in giving a boost to the national economy." Managing Director of Karnaphuli Shipbuilders Ltd Engineer MA Rashid said marine vessels, ferries, cruise- ships, fishing boats and launches are built in the country's coastal belt and the offshore islands, but the potential of this sector still remained untapped simply for lack of visionary entrepreneurs, favorable atmosphere and government support."We can raise GDP (Gross Domestic Product) by at least 3 per cent within the next six years if we're given a favorable environment," he said. It can create huge jobs at shipyards and its backward linkage industries. The annual turnover of the global shipbuilding industry is around US $ 1,522 billion. European shipbuilders stopped taking orders until 2010, while Asian shipbuilders in Korea, Japan, China, Singapore, Malaysia and Vietnam have already received adequate export orders. It is assumed that over US $ 300 billion worth of export still remain untapped and local ship-making companies can grab this opportunity. It is satisfactory that our government has approved a principle about shipbuilding and announced shipbuilding as a industry. The cost of building an ocean-going ship in Bangladesh is around 15 per cent less than in any other competitor countries, thanks to the cheap labor
  • here, a study of the Danish Embassy said Monday. According to the Danish study, the existing average labor wage per hour in Bangladesh is around US dollar 1.5, compared to $ 3.0 in a Chinese shipyard, $ 8 in South Korea, $ 16 in Italy and $ 18 in the US. Bangladesh can supply only 10 per cent of the components required for building an exportable ship, but its support to the domestic inland and coastal vessel manufacturing is around 40 per cent, most of which is believed to be coming from small and medium enterprises (SMEs).Bangladeshi shipbuilders are eying at least $100 million dollar proceeds from their overseas deliveries this year which will be a milestone in their efforts to build a billion-dollar ship export industry within the next few years. TOURISM INDUSTRY: By creating job opportunities tourism industry in Bangladesh can assist in the contribution towards the gross domestic product or the GDP. Foreign Visitors Arrival by Months (2007) Sl. Month Arrival Year 1. Jan 16,733 2007 2. Feb 17,308 2007 3. Mar 17,579 2007 4. Apr 23,956 2007 5. May 20,853 2007 6. Jun 27,483 2007 7. Jul 32,223 2007 8. Aug 20,614 2007 SUGGESTION: 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 at the national level, until Dhaka was ranked as the third largest outsourcing destination in 2010, among all cities in the world, in a study conducted by oDesk 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 day from Bangladesh, freelance and Bangladesh, freelancing in Bangladesh, Freelancing in Bangladesh perspective, freelancing revolution, Home based business in Bangladesh, Online earning tips and tricks, the animation spree. So, the government should take proper step to take the facility from the outsourcing. Bangladesh would take part in the Call Centre Expo to be held at Birmingham in the United Kingdom (UK) in order 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 best returns. Industrious low-cost workforce Bangladesh offers a well- educated, highly adaptive and industrious workforce with the lowest wages and salaries in the region. 57.3% of the population is under 25, providing a youthful group for recruitment. The country has consistently developed a skilled workforce catering to investor. So, foreign ministry should 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 the social problems by forming social welfare organization. Like Songket, Badhan, Abodan etc. EXPORT PROCESSING ZONE(EPZ): For the enhancement of national income foreign investment is important. Since attracting foreign investment is the prime objective of EPZ, so it is necessary to effective the all EPZ of Bangladesh. Government should 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 story signatory of MIGA (Multilateral Investment Guarantee Agency),signatory of ICSID (International Centre for Settlement of Investment Dispute),member of WIPO (World Intellectual Property Organization), member of OPIC (Overseas Private Investment Corporation), asia's low cost 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 foreign country or international financial organisation. But in most cases the terms and conditions of these foreign aid are unfavourable for our economy. In these cases government can form public limited company to finance the required money from local capital market. EXPANDING THE AREA OF FINANCIAL INSTITUTION: Saving is the raw material of investment. But the savings rate of Bangladesh is very low. In FY 2008-09 the domestic and national savings as percentage of GDP were 20.09 and 29.57 percent respectively. Clients living in local slums or village can commit to deposit 50,100, 200, 300...1000 Taka per month. If we want to increase savings, financial institution must go to the root level .
  • Electronic banking or online banking is now one of the important form of building digital Bangladesh. With the help of e-banking customers can shop, pay bills, buy items at auction, and transfer money from anywhere at any time. As a result mobilization of economy enhanced. POLICY RECOMMENDATIONS: A well functioning e-banking network need availability of a backbone network connecting the whole country; reliable and secure information infrastructure including telecommunication infrastructure; ICT penetration in the banking sector; skilled operational personnel; and legal 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 should involve in the economic circle. So, the government should decentralize total Bangladesh as economic zone. Government should finance separately according to the economic zone. POLITICAL STABILITY: Though there is all the characteristics of development of Bangladesh economy, yet it has not reached to the basic meaning of development because of political violence. To overcome these problems, every political parties should sacrifice their individual selfishness for the ultimate development of Bangladesh economy. IMPLEMENTATION OF BUDGET: If we can make the implementation of budget, it is possible to enhance the national income. INCREASE INVESTMENT:
  • At the beginning of the nineties, the share of private investment in total investment was about 60 percent, which stood at 80.84 percent in FY 2008-09. An analysis of the investment data reveals that the contribution of public sector in total investment is gradually decreasing whilst the contribution of private sector investment is gradually increasing. Following table show the year-wise investment as percentage of GDP for the last few years. Investment as percentage of GDP 0 5 10 15 20 25 Total investment Government investm Private investment CONCLUCION: Bangledesh is still very prospective economy. We need proper leading to effective this prospective. If every people work honestly with the sense of love to the country, Bangladesh may be in the serial of developed country 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 - 2011 First BDT 1,65,000 Nil Next 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 of age 65 years and above Assessment Year 2010 - 2011 First BDT 1,80,000 Nil Next 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 Year 2010 - 2011 First BDT 2,00,000 Nil Next 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. 2,000 Non-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 is a progressive tax system. Bangladesh Income tax is imposed on the basis of 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 tax system aims at ensuring equity and social justice. Tax rates in Bangladesh also 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 other corporations 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 tax administration in Bangladesh and collects almost 75.37 percent of total revenue for the country, non tax revenue 20.88%, revenue beyond NBR 3.76%. (NBR Annual Report, 2007). It was 78% in 2000. Tax revenue constitutes around 80 percent of total internal resources in the country. The NBR under the Internal Resources Division of the Ministry of Finance is the apex tax authority of Bangladesh and collects about 95 percent of the country’s total tax revenue. The non-NBR portion of tax mainly 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 LOW In FY 1999-00, revenue/GDP ratio was 8.47 percent, which gradually rose to 10.79 percent in FY2005-06. In FY 2007-08 the revenue/GDP further rose to 11.17 percent and the increasing trend of revenue-GDP ratio further enhanced to 11.24 percent in FY2008-09. Table 1 shows tax and non-tax revenue receipts and tax-GDP ratio during the period from FY1999-00 to FY2008-09. As Table 1 shows, the tax GDP ratio in Bangladesh is very low, it is less than 10%. Though tax-GDP ratio has risen from 5% in the early 1980s, it is still very low compared to even the
  • neighboring countries[1]. It is also lowest among the developing countries[2] Table 1: Revenue as percentage of Gross Domestic Product Year Total Revenue as % of GDP Tax Revenue as % of GDP Non-tax Revenue as % of GDP 2000 8.47 6.78 1.69 2001 9.6 7.8 1.8 2002 10.21 7.81 2.4 2003 10.35 8.30 2.05 2004 10.63 8.5 2.13 2005 10.57 8.62 1.96 2006 10.79 8.70 2.09 2007 10.58 8.40 2.18 2008 11.30 8.96 2.34 2009 11.25 9.03 2.22 2010 11.5 9.3 2.20 Source: Bangladesh Economic Review 2010, Ministry of Finance, Government of Bangladesh 2. HEAVIER RELIANCE ON INDIRECT TAXES: Total taxes in Bangladesh are divided into direct and indirect taxes. Direct taxes in Bangladesh consist of taxes on income (income tax, corporation tax, 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 Table 2 shows, around 75% of the total tax revenue in Bangladesh is comprised of indirect taxes. The direct taxes in general accounted for less than a fourth of the total tax revenue of the country. Traditionally, the tax structure of Bangladesh is such that it has to rely on indirect tax for revenue 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, June 2007 Among the indirect taxes, VAT constitutes 39 percent of total tax revenue for FY09, followed by supplementary duty as shown in figure 1. Taxes on Income and Profit occupies major share of direct taxes, with 26 percent of total tax revenue in FY09.The sources for such high growth of revenue collection in the recent years are the increase in income tax and value added tax (VAT) at local stage which grew by 20.83% and 25.60% respectively.A slow move towards increasing the income tax is being observed recently. The proportion of tax is targeted at 29% and of VAT by 35% 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 of Bangladesh 3. NARROWLY BASED TAX STRUCTURE: Both direct and indirect taxes are quite narrowly based in Bangladesh. For example, in direct taxes, agricultural land has not been a buoyant source of revenue as the rates have not been revised periodically (McCarten, 2005). A significant number of tax expenditure measures exists in both direct and indirect taxes which creates an adverse impact on the overall revenue effort. 4.LOW REVENUE PRODUCTIVITY AND HIGH ADMINISTRATIVE COSTS:
  • Empirical studies have found that poor logistics, lengthy procedures, unofficial payments, etc. of Bangladesh tax system lead to high administrative costs and low revenue productivity (McCarten, 2005). TAX EFFORT INDEX OF BANGLADESH : Bangladesh is a lowest tax effort country among the developing countries. According to a study[4] conducted by policy analysis unit of Bangladesh Bank found that Bangladesh as the lowest tax effort country in the sample[5], with an average tax effort index[6] of 0.493. This has important policy implications that Bangladesh and other countries having low tax effort (less than unity) are not utilizing their full capacity of tax revenue, and therefore, have the potential for financing budgetary imbalance through raising tax revenue. The tax effort index for both direct and indirect taxes is below 0.6, implying that Bangladesh has the potential for raising revenue collection from both direct and indirect taxes. In terms of tax buoyancy[7], Bangladesh ranks the second highest among the sample countries, with a tax buoyancy ratio 1.235, meaning that tax revenue is quite responsive to GDP and effort has been made to increase tax 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 0.553 Source: A Panel Study on Tax Effort and Tax Buoyancy with Special Reference to Bangladesh, Lutfunnahar Begum, Policy Analysis Unit Bangladesh Bank, Working Paper Series: WP0715, June 2007 DISTRIBUTION OF TAX BURDEN AMONG DIFFERENT CATEGORIES: Taxpayers can be categorized into three main groups; corporate tax payers, salaried tax payers and other tax payers. The elite group consists of corporate taxpayers, in terms of no. their percentage is very low. In 2000 it was 3.02 percent, the salaried taxpayers share is about 18.81 percent and
  • the largest group consists of remaining all others and mainly those who have income from business and profession is about 78.18 percent. CORPORATE TAX PAYERS: Corporate sector though has a poor number of taxpayers paying almost major portion of total income taxes and the majority come from small 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 9.6 percent for a holiday period of 8 years and to zero for 12 years. Besides, If any 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 Revenue TAX HOLIDAY AND REVENUE LOSSES The existing tax law permits, extension unit of an industry to be entitled to tax holiday. Such facilities of granting tax holiday have been found ineffective. A mechanism of internal transfer pricing could be arisen as a vehicle for perpetual tax holiday. As observed, the present income tax act is full of rebates and exemptions (Hussain, 1999). It is now needed to minimize and to come straight to a threshold of income, which is taxable. The present scheme of granting tax holiday has not been a very good experience.Under the tax holiday, revenue loss arises from two main sources. The first is direct loss due to exemption of company income during the holiday period. The second is the loss due to the transfer of profits from companies under standard tax rules to companies benefiting from tax holidays. The transfer of profits has been commonly observed in countries where tax holidays are granted.The NBR has attempted to estimate the size of revenue forgone under tax holidays. A major problem was encountered, however, as a large number of companies under tax holidays failed to file tax returns as required. Based on the partial data available, the NBR placed the amount of tax revenue loss over a five-year period (from FY1980 to 1984) at TK 40 million per annum. In an
  • alternative estimate by World Bank, the expected revenue loss is about TK 126 million per annum[8]. TAX HOLIDAY CREATES DISTORTION IN TAXATION MECHANISM The benefits of the tax holiday are being enjoyed mainly by the garment industries. Their growth has enhanced due to external factors. Even if the incentive of tax holiday were not given, the garment industry would have grown up and the state would have earned quite a substantial amount of revenue from the industry. Thus the revenue foregone does not appear to be fiscally efficient (Waresi, 1998). However this has not been able to foster industrial growth in different regions of the country. Such a perpetuating provision for tax holiday creates distortion in taxation mechanism and against the norms of equity and neutrality. It is thus important to restrict such unbound opportunities for the sake of better future of the country. BLACK MONEY IS BEING LAUNDERED THROUGH THE MECHANISM OF TAX HOLIDAY Under the present arrangement any income accruing from poultry, fishery, livestock etc. is exempted from income taxes until June 2011. This provision is being abused indiscriminately. A lot of black money is being laundered into the market through this mechanism. One potential remedy should be to allow an initial support to this sector then bringing back them under the purview of taxation. REGISTRATION IN STOCK EXCHANGE AND ITS AFFECT ON TAX REVENUE In case of Bangladesh, publicly traded companies or companies listed to the stock markets usually enjoy some extra privileges. If any publicly traded company declares more than 20% dividend, 10% rebate on total tax is allowed. It has been experienced in Bangladesh that a number of companies are reluctant in paying dividend to the shareholders so regularly rather retain their earning for tax purposes. As a result, not only the shareholders are deprived, the general investors are also discouraged from investing in capital market. It seems government might has to use some tax instruments
  • to cope with such problem. It is really necessary to reduce the corporate tax rates to level for improved tax compliance and also to promote investment and industrialization. The challenge is thus now to obtain an optimal rate of taxes for the corporate sector that might not be hindering the countries economic growth. Secondly not all the companies invest equally in share market, in 2006 the Barger Bangladesh (a multinational company) got tax holiday TK 3.8 crore only investing 5% primary share[9] and the rest of the company invested 20%[10]. It was also found that a portion of privately owned companies paying no taxes for the government and showing negative income and revealed as losses (13% in FY 2000).[11] PERSONAL INCOME TAX NARROW TAX BASE The present income-tax base of Bangladesh is one of the lowest even among the developing countries. Less than 1 percent of are within the tax net. In case of personal income taxes, the burden is unevenly distributed among the registered taxpayers. In reality a major portion of taxes is paid by a small group of people with higher marginal rates. A number of registered taxpayers always remain in lower income groups for either due to mainly more available tax incentives or tax exemptions and share a little burden of taxes often at lower marginal rates. In case of Bangladesh, such taxpayers are small and medium traders and manufacturers. A lot of investment remains untaxed due to tax amnesty is a problem too for Bangladesh. Substantial amount of taxpayers having business income remain in losses those are subject to set off for several years also remain outside actual tax net. In that sense, the wage earners seems rightly taxed as such taxes are withheld by employer and paid by them[12]. Table 5 : Incidences of personal Income Tax (FY 2011) Income Classification in TK % of payable tax for male % of payable tax for 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 AND PUBLIC SECTOR: In Bangladesh, income tax for government employees is deemed paid by their employer that is government. However, if a private employer pays 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 to avoid 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 potential to opt for greater revenue mobilization through internal resources in order to meet the budgetary deficit. There are unlimited tax exemptions and tax holidays, poor tax base, inequality of taxing, repeated tax amnesty etc. Therefore, it is important to place greater emphasis on administrative reinvention and policy reform in order to identify and remove the loopholes in the revenue generation process. 2.1.2 Tax-GDP Ratio Figure 2.1.2 shows the structural changes that took place in Bangladesh's revenue structure with Secular decline in customs duty, from 2.6% in 1973-1980 to 1.8% of GDP 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 to 1.9 % in 2006-2008.The supplementary-to-GDP has increased from 0.9% from its introduction in 1991 to average around 1.5%.Increasing contribution of income tax and VAT would enable Bangladesh to meet the demand for increased domestic resources for larger investment to achieve higher growth. For details please see Appendix 2.1.2 2.1.3 Direct and Indirect Tax Ratio to Total Tax Revenue Figure 2.1.3 shows that: Indirect taxes (VAT, customs) represent the largest components of tax revenues. It averaged around 85% until the 2001-2005 period and currently represents about 80% of the total tax revenues. Up to the 1990s, the share of direct taxes, i.e. income tax was below 15% of total tax revenues. It started to increase and crossed 20% mark during 2006-2008 period. However, it remains the lowest in the south Asian region. In the developed countries the share between direct to indirect tax is the reverse of what it is in Bangladesh. For generating desired level of domestic revenue to support economic growth, 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 total direct tax. Other types of direct taxes such as travel tax, electricity tax etc are 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 2000-01 period. However, during 2000-07 period growth in the individual income tax is higher than the corporatetax amid the expansion of the private sector business.