An Overview of the Reforms of Personal Income Tax (PIT) in Bangladesh

Abstract

Bangladesh is a country of about 170 million people. But the tax-GDP ratio is yet to reach the double digit. There are some tax reform efforts already have taken to update the tax policy and tax administration for expected outcome. This paper attempted to review those reform efforts highlighting the personal income tax (PIT) and to summarize the reforms already have done and their implications in the revenue performance. It is an exploratory research and secondary sources of data are used to accomplish this study. After a thorough review of the reform initiatives, this study has got some point like complexity of the tax code, number of tax payers become double in last 5 years but the collected revenue is not proportional to the increased taxpayers. Collection of tax through TDS has increased to almost 60 percent. It implies the enhanced compliance and efficiency of the tax regime. Introduction of e-filing, e-payment, and universal self-assessment have reduced the hassle of taxpayers. Administrative capacity in terms of infrastructure and manpower has increased. All these progressive efforts do not bring any mentionable change in the tax structure of Bangladesh. Ratio of direct to indirect tax is very high i.e., about 30 to 70. Of this low-slung direct tax, contribution of PIT is about 40 per cent. To grow a middle-income country and sustain, contribution of PIT to the tax structure should be increased through appropriate reforms in this field.