Bangladesh To Tackle Grey Economy

by Mary Swire, Tax-News.com, Hong Kong

22 February 2010

Speaking in Dhaka, Bangledeshi Finance Minister, Abul Maal Abdul Muhith announced that in an effort to increase the country’s tax-take, efforts to increase compliance would have to be redoubled, with efforts channeled in particular towards encouraging businesses to declare and remit value-added tax (VAT).

Addressing participants at the National Board of Revenue-organized seminar, the minister noted that of the country’s 150 million-strong population, 40 million were middle-income earners, yet only 3 million people in Bangladesh pay personal income tax. He therefore announced that it is to be the tax authority's aim to tackle the grey economy, to at least increase the number of people registering for income tax to 4 million, with a longer-term target of 10 million.

While personal income tax compliance is particularly poor, the minister asserted that the major problem remains in the declaration of VAT. Currently few organizations report their tax liabilities, and few smaller businesses produce till receipts. "We have to increase the number of registered VAT payers to reduce dependence on import revenue," Muhith explained, admitting that the VAT law would have to be simplified to this end. "It's an increasingly globalized world and we have to adapt to changes; we have to lessen our dependence on import duty by raising revenue earning from domestic sources.”

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