Final Assignment for financing for development Topic : Role of taxation in development

1. FINAL PROJECT
TOPIC: ROLE OF TAXATION IN DEVELOPMENT
Objective:
• To know about the role of taxation in development
• To know the Bangladesh perspective of the taxation and
development
•Tax administration in Bangladesh

2. TAXATION AND DEVELOPMENT
Taxation is the biggest source of fund for government in
many countries.
 Government may pool money from diversified sources
and use for development.
 Government may use taxation as a tool to reduce gap
between rich and poor, i.e. to establish economic equality.
 The tool may also be used in reducing regional economic
gap.
 On the other hand, the accumulated tax revenue may be
used for social and infrastructural development, for
example – roads, bridges, schools, universities and so on,
that will accelerate overall economic development of a
country.

3. GDP AND TAXATION: BANGLADESH PERSPECTIVE
• Tax – GDP ratio is an important issue in public funding of development.
Tax is a vital source of revenue for the development activities of a country.
• In general, % of tax to GDP is above 25% for developed countries and
between 15% to 25% for developing countries, whereas the percentage for
Bangladesh is 12% as per World Bank report of 2011.
0
5
10
15
20
25
Developed
country
Developing
country
Bangladesh
% of tax to GDP
% of tax to GDP

4. BANGLADESH GDP GROWTH AND TAXATION
 Bangladesh’s GDP has been growing consistently in
last couple of year. Alongside, tax revenue has been
also increasing while tax rate remains stable.
 On the other hand, it has been found that the majority
portion of it’s tax revenue is collected from few
corporate houses.
 A good number of individuals and firms either not
paying tax or paying very small amount of tax. This
happens mainly because of the corruption and
incapacity of tax personnel/authority.
As the economy of Bangladesh has been growing, its
fiscal expenditure has been growing very rapidly.
 A comparison of fiscal expenditure is shown in the
next slide.

5. BANGLADESH GDP GROWTH AND TAXATION
Fixcal…
0
100000
200000
300000
2011 2012 2013 2014
Fixcal Expenditure (BDT Billion)
Fixcal
Expenditure
(BDT Billion)

6. BANGLADESH GDP GROWTH AND TAXATION
 As we can see the fiscal expenditure is growing very
rapidly, the government need to think very seriously about
the generation of fund to finance its revenue and capital
expenditure. As the world policy has been changing and
developed countries are not in a position to distribute grants
generously, developing countries need to think more of
internal sources for financing its activities.

7. TAX ADMINISTRATION IN BANGLADESH
 In Bangladesh, people do not find it comfortable to deal
with tax personnel and tax system.
 It is found that the tax personnel mostly approaches to the
known zone repeatedly and not exploring new zone or area
to expand tax net.
 On the other hand, people has a tendency to avoid tax
personnel or tax system because of their fear of undue
harassment or arrangement.
 It’s also found that it is much cheaper, in most of the time,
to manage tax personnel than paying right amount tax.
 Furthermore, the documentation and information retaining
system in Bangladesh has not developed so far yet so that
tax and VAT collection may get optimum benefits from it.

8. CONCLUSION
 As the tax can be vital tool for development, there need to
be significant reforms to be done in the area of taxation.
 Introduction of online system may reduce the corruption as
it will reduce the scope of tax personnel to do corruption.
 The innovative ideas, for example – tax fair, may attract
more people to get involve in the tax system.
 Initially, government may need to invest in the system so
that documentation and information system get into a
reasonable level.
 Reforms in tax administration by introducing new ideas and
innovative people will help to strengthen the tax collection
system.
 Finally, it need to ensure that value for money of public
money is attained. It will motivate people to pay tax, at the
same time it will ensure development.