5 Reason Of Tax Evasion In Bangladesh And How To Avoid Them
It is critical to follow taxation regulations in order to maintain the system operating for everyone and to support services and programs that improve people’s lives.One way to encourage compliance is to keep the rules as simple and straightforward as possible. Overly convoluted taxation systems are associated with a high percentage of tax evasion.
The rate of compliance is low, and the tax culture is weak. Every year, billions of dollars are stolen out of Bangladesh, depriving the country of much-needed revenue. The goal of this essay is to look at the causes, repercussions, and solutions to tax evasion in Bangladesh.
The country has a progressive tax system with rates ranging from 10% to 30%, but no social security tax. Employers must pay a 35 percent corporation tax if they are a non-listed entity, or a 25 percent tax if they are a publicly traded entity.
5 Causes Of Tax Evasion
1. Policy Issue:
For many governments in low- and middle-income countries, improving taxation is a top objective. A well-designed and fair tax system can boost a government’s revenue, reduce its need on foreign assistance, and strengthen its power. Improving tax collection is a difficult task.
2. The evaluation’s context:
Bangladesh has a taxes collected ratio of 9%, which is significantly lower than its neighbors. The value-added tax (VAT) accounts for the majority of the country’s tax revenue, yet the amount collected is far less than what is owed. Many businesses are still unregistered. Only 16 percent of registered businesses file regular Tax returns, indicating that there is likely significant evasion among filers.
3.Corruption in the income Tax Department:
In underdeveloped nations like Bangladesh where corruption within ITDB is also another source of tax evasion, the issue is even worse. Taxpayers believe that tax authorities are crook, and that they must pay bribes to them in order for their tax assessments to be complete.
4. A lack of understanding:
Tax awareness has a relationship between tax compliance, according to Eriksen and Fallan (1996), and taxpayers’ lack of understanding is another source of compliance in Bangladesh. This lack of understanding may be due to taxpayers’ failure to comprehend the legislation or to the taxation department’s lack of tax information.
5. Lake Of Information:
Information is essential for detecting tax evasion and improving voluntary compliance. The main issue that tax administrations face, according to Lederman, is information gap. Most of the time, the authorities must trust the taxpayers to supply information regarding his or her earnings. Asymmetric information on taxpayers’ financial transactions is also a concern for the ITDB.
Necessary Steps To Avoid Tax Evasion
1. Affordable Income Tax:
Since 2010, the ITDB has conducted a yearly tax show to encourage taxpayers’ voluntary compliance. Taxpayers can conveniently submit their returns and pay their taxes at this fair without being harassed. The income tax fair was deem a success in terms of improving compliance and tax payer feedback has been overwhelmingly positive.
2. Tax Amnesty Program:
This is refer to as a “black money whitening” scheme, and it is highly contentious . Several times in the last 40 years, similar taxation pardons have been granted; yet, the NBR has been unable to get access to the underground economy .Rather, this method has promote honest taxpayers to underpay taxes or engage in tax evasion.
3.The NBR’s Central Intelligence Cell:
As part of the NBR modernization effort, the Central Intelligence Cell (CIC) was found in 2004.The creation of the CIC, according to the IMF, was a bold move toward improving Bangladesh’s tax administration’s inadequacies.
Consequences of Tax Evasion
1. Dhaka’s infrastructure has been strain by high economic growth, in-migration, and urbanization, with businesses reporting more than one power outage every working day.
2. Investments are require to upgrade infrastructure and maintain growth. On the other hand, Bangladesh is among the poorest tax-to-GDP rates in the world. This research looks at how Bangladeshi authorities can improve tax compliance.
3. A randomize control experiment was conduct to assess the effectiveness of a variety of programs design to capitalize on businesses’ interest in social rewards and peer recognition in order to encourage voluntary tax compliance.
Tax Evasion in Popular Culture: Myth and Reality
“Tax Evasion in Popular Culture: Myth and Reality” explores the complex relationship between taxation, evasion, and also their representation in popular culture. Often, film and literature portray tax evasion as a victimless crime or even a sign of rebellion against an oppressive system. Characters who evade taxes are sometimes romanticize as cunning individuals outsmarting a flaw system, perpetuating the myth that tax evasion is an act of individualism rather than a serious crime.
In reality, tax evasion leads to revenue loss for governments, resulting in fewer resources for public services like healthcare, education, and infrastructure. It exacerbates economic inequality by shifting the tax burden from the wealthy. Who are more likely to have the means to evade taxes, to the less affluent.
Furthermore, the portrayal of tax authorities in popular culture often perpetuates stereotypes of them as faceless, ruthless entities, discouraging compliance and encouraging resentment. In reality, these agencies are compose of individuals working towards a fair and functioning society, and their work is crucial in maintaining public services and ensuring economic equality.
In the end, the glamorization of tax evasion in popular culture contributes to a misunderstanding of the serious nature of this crime and its implications. It’s important to separate the myths propagated by popular culture from the realities of tax evasion. Recognizing its true impact on society and also the importance of tax compliance for the common good.
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Final Word
Tax compliance and tax evasion are inextricably link. There is evasion where there is taxation. As well as, tax evasion has a significant negative impact on the economies of developing nations such as Bangladesh. Tax evasion skews the economy, generates a sub-soil economy, and encourages tax administration corruption. Although, the report is a limited attempt to examine some of the challenges surrounding Bangladeshi tax avoidance. A robust tax culture, bolstered by strong political will, will be beneficial to addressing Bangladesh’s tax evasion problem.
