Tax-to-GDP ratio is very low in Bangladesh: IMF

The International Monetary Fund (IMF) has said that further efforts are needed in Bangladesh to raise on a permanent basis the ratio of tax to gross domestic product (GDP), with particular importance placed on the introduction of a value-added tax (VAT).

Bangladesh’s tax-to-GDP ratio is very low, even when compared to other low-income countries, and should be raised in order to create fiscal space for increased priority spending, the IMF said.

IMFThe government should focus on implementing the new VAT and strengthening revenue administration, the Fund said in its 2014 Article IV consultation report with the country.

The report noted that VAT implementation has proceeded apace, with support from the Fund and other donors. The immediate priorities are now to move ahead expeditiously with the selection of a VAT software provider and with the tendering process for an external management consultancy for the implementation of the VAT project, the IMF said.

The Bangladeshi authorities were urged by the IMF to press ahead with further automation of tax administration, including the roll-out of online taxpayer registration, and to increase staffing levels and training at the National Board of Revenue (NBR). In addition, NBR should be held more directly accountable for tax revenue performance, the report recommended.