Collection of tax Update

Expenditure on Interest rate

The study finds that the gap between revenue collection and expenditure is getting wide over the years and also projects that the gap will be wider in the upcoming fiscal year. Falling revenue has been resulting in rising per capita debt burden, increasing pressure on the ability of the government to carry out regular as well as developmental projects, and crowding out of private investment. The slow growth rate in revenue collection has also been exposing the country to external terms and conditions in implementing its domestic economic policy. Additionally, regressive nature of the tax system has diminished the capacity of the state to raise revenue while putting pressure on the marginalised.

The collection of tax is significantly lower for a number of reasons. The country has a narrow tax base. There exist wide opportunities of evading and avoiding tax. Finally, structural weaknesses of the economy, have added further difficulties to tax collection. For example, more than 69 percent of total tax comes from indirect sources in Bangladesh. Therefore, strengthening of regulatory policy along with structural reforms, and innovation in the tax system is the requirement of time.

In addition, expenditure on subsidy and current transfer and on goods and services might be reduced through increasing the efficiency and capacity. With a view to obtaining this goal, achieving the enhancement of the effectiveness of public expenditure, especially in physical infrastructure as well as in social infrastructure, i.e. education and health is important. Furthermore, regressive tax structure including indirect tax needs to be reconsidered. Exploring effective options to increase the other internal resources other than borrowing from banking sector has to be carried out.

Finally, it can be said that although deficit financing is weak fiscal tool for fostering economic growth of any country. However, it can be used properly to mobilize additional resources for economic and social development, and most importantly, in the creation of employment.

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