Staff Correspondent
Increasing tax rates alone does not necessarily lead to higher revenue collection, experts highlighted during a roundtable discussion.
Speakers at the event noted that Bangladesh's effective tax rate is disproportionately high. Despite low nominal rates on paper, the effective tax burden reaches 45%, and in some cases, exceeds 80%.
The event, organised by the Institute of Chartered Accountants of Bangladesh and the Economic Reporters' Forum, was held today (27 January) at Karwan Bazar in the capital.
Moinul Khan, chairman of the Bangladesh Trade and Tariff Commission and a former member of the VAT wing of the National Board of Revenue (NBR), said, "We have seen in the past that revenue collection has increased not by increasing the tax rate but by reducing it. At one time, after reducing the tax rate in hotels and restaurants to 5%, revenue collection increased by 40%.
Similarly, after making the VAT rate for sweet shops 7.5%, collection increased."
He underscored that self-compliance should be prioritised over rate hikes, noting, "Revenue collection does not always increase by increasing the rate. Rather, it also increases by reducing the rate."
The discussion also addressed the government's recent decision to raise VAT rates on nearly 100 goods and services without prior consultation, sparking widespread public concern.
Masrur Reaz, chairman of Policy Exchange Bangladesh, said, "In recent years, the country has undertaken many unnecessary projects with very high expenditures. A project worth Tk5 has been taken for Tk25. This pressure has been transferred to the revenue board to collect additional revenue. Until this undue pressure on the NBR decreases, sudden increases in tax rates will persist."
Muhammad Abdul Mazid, a member of the Advisory Committee on NBR reforms and a former NBR chairman, along with other committee members, also attended the discussion.