Group Portfolio Suggestions for Enhancing National Income

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………………………………………………………………………01
NATIONAL 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 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 5.89
2. Fishery 4.18 4.16 4.50
3. Mining & Quarrying 8.94 9.84 10.05
a. Natural gas & crude petroleum 8.26 9.15 9.44
b. Other mineral resources 10.01 10.90 10.97
4. Industry (Manufacturing) 7.21 6.68 5.92
a. Large & medium-scale 7.26 6.58 5.64
b. Small-scale 7.10 6.90 6.61
5. Electricity, Gas & Water 6.77 5.91 6.98
a. Electricity 6.68 5.39 6.93

b. Gas 7.72 8.42 8.15
c. Water 6.00 8.39 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 8.55 8.01 7.20
a. Surface transport 4.54 5.17 5.43
b. Water transport 2.54 2.46 1.09
c. Air transport 6.20 7.38 9.64
d. Support transport services, storage 8.45 9.64 11.77
e. Post & telecommunication 21.64 16.11 11.92
10. Financial Intermediations 8.89 8.99 8.35
a. Bank 8.38 9.05 7.69
b. Insurance 10.03 8.38 9.92
c. Others 12.47 11.13 11.98

11. Real Estate, Renting & other 3.75 3.81 3.84
Business Activities
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 4.62 4.70 4.74
Services
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

25

20
Total inve
15
Governme
10
Private inv
5

0

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

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

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 Tax Revenue as % of Non-tax Revenue as %
GDP GDP 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 % 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 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.

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