Tk 84,000cr tax revenue lost each year from informal sector: CPD

Bangladesh is missing tax revenue of Tk 84000 crore each year due to irregularities, institution inability and tax avoidance tendency, according to a study report conducted by the Centre for Policy Dialogue (CPD) published on Monday.

The study also found that around 68 percent of people do not pay income tax even after earning taxable income.

The CPD, a think tank, presented the study in a media briefing at its Dhanmondi office.

The study has been entitled “Corporate Tax Transparency Issues and Concerns in Bangladesh Its Implications on Tax Losses and Social Spending.”

Dr. Khondaker Golam Moazzem, research director of CPD, presented the research paper. CPD Executive Director Fahmida Khatun moderated the programme.

Dr. Moazzem said that 68 percent of people do not pay income tax even after earning taxable income. That is, two-thirds of people do not pay tax even when they are eligible to pay tax. This is the major reason why the tax-GDP ratio has not increased.

On the other hand, 2.13 lakh companies are registered in Joint Stock Company, but only 45 thousand companies have filed returns, he said.

He said the size of the informal sector in Bangladesh is 30 percent of GDP.

The amount of tax in the informal sector was Tk22000 crores in 2010, which increased to Tk 84,000 crores in 2021.

About Tk 84,000 crore tax loss occurs in the shadow economy which is also called the informal economy. If this money was included, then the expenditure on the social security sector could be tripled. In other words, the main obstacle to the growth of the tax net is the informal sector, the study said.

A large portion remains out of tax, resulting in the tax loss that is increasing day by day, Dr. Moazzem said.