Include affluent urban residents in tax system

In a bid to relieve the tax burden on the middle and lower-income groups, noted economist Dr. Binayak Sen has recommended bringing wealthy individuals, who account for 45% of urban income, under the tax net. Dr. Sen, who is the Director General of the Bangladesh Institute of Development Studies (BIDS), suggested that by taxing this affluent group directly, there would be no need to increase tax rates for the middle and lower-income earners.

During a post-budget discussion titled “National Budget for 2024-2025 and the Medium-Term Outlook on the Bangladesh Economy,” Dr. Sen emphasized the importance of reforming the National Board of Revenue (NBR) to enhance revenue mobilization without burdening the middle and lower-income groups with additional taxes.

Based on the findings of the Household Income and Expenditure Survey 2022 (HIES 2022), Dr. Sen highlighted that 45% of urban income is concentrated in just 10% of urban households, comprising approximately 20 million people who are eligible to pay taxes. He stressed the need for key institutional reforms, including those in the financial sector, to accelerate revenue mobilization and meet budgetary expenditures.

Dr. Sen also questioned the flat 15% tax rate for legalizing undisclosed income, suggesting that tax rates should be based on individual circumstances rather than a uniform rate. He recommended coordinated policy actions, such as forming a banking commission for financial sector reform, to ensure sustainable economic growth.

Overall, Dr. Sen’s recommendations aim to create a fairer tax system that eases the burden on the middle and lower-income groups while ensuring that the wealthy contribute their fair share to national development.