The fact that the national board of revenue (NBR) has expressed its intention to revise the taxation rate by 5.0 per cent upwards for higher income people has naturally ruffled feathers. And the move has been criticised by experts and economists alike. There is no denying that the elevated cost of living due to sustained high inflation rate has put a pressure on everyone and that is one of the reasons for the backlash the revenue authority is facing currently.The Covid pandemic put a serious dent into the economy and this has been followed by a continuing war in Europe. Of late, another theater of war has opened up in the Middle East that threatens to embroil the entire region into conflict. The series of negative events happening in the international arena have put the world economy on a backfoot and Bangladesh is not immune to any of these shocks.

The point of contention is the path being proposed by the revenue authority. While progressive taxation is a widely accepted international practice across continents, the question is whether this is the best path to dramatically increase domestic revenue collection. Questions have been raised as to whether NBR is going after the low hanging fruits by excessively taxing the wealthy instead of initiating reforms that would fundamentally change the way revenue is collected in the country.

Economists and tax experts have been quick to point out some fundamental problems when it comes to domestic resource mobilisation. One such opinion is that the government should focus on property taxes rather than excessively taxing individuals. That move ran into all sorts of problems because the manner in which taxation on fixed assets such as land and housing was doubled, it merely created a situation where individuals and entities went on purchasing / selling such assets but didn't involve transfer of ownership. Government revenue actually plummeted.

Focus should instead be put on widening the tax base. A higher tax slab on the wealthy can only bring in so much revenue, rather, bringing millions more under the tax regime will provide the State with much needed revenue to boost up its annual development programme. As pointed out by experts, the revenue authority's time would be better spent if it concentrated on stopping tax evasion and avoidance - practices that are rampant and are possible because of loopholes in the system. Plug those loopholes and the revenue scenario would change drastically!

There is little justification to increase the tax rate on salaried individuals at a time of hyper-inflation. Inflation vis-à-vis wage increases have actually resulted in real loss of income. Critics believe that qualitative spending of tax payers' money would go a long way to address the country's growing income inequality rather than merely raising taxation. As pointed out by a recent study conducted by a leading think tank, about 43 per cent of taxpayer money is spent on salaries, pension and other benefits for government officials.

Industry leaders have pointed out that higher income tax during this time isn't justified due to the fall in GDP growth rate from 7.03 per cent in FY2020-21 to 6.40 per cent in 2023-24 and slated to fall further to 5.4 per cent in 2024-25.Given current economic climate in the country, industrial production is adversely affected by high inflation, rising interest rates and utility price hikes. There is no recourse but to increase the tax base whereby millions of tax-payable individuals / business entities start paying their due. Revenue mobilisation should not mean squeezing the already squeezed tax payers, while millions get away scot-free.