Abstract:
Significantly higher accumulation and mobilization of domestic resources for financing national
budget was the panacea of recent rapid economic growth of Bangladesh. Though internal
resource is crucial for the economic development, the tax revenue collection gap in Bangladesh
is unusually high. Focusing on the banking sector which is the largest direct tax revenue source
of NBR, the study attempts to explore the reasons, factors and the interrelationship among the
factors that determine the tax revenue collection and the difference between expected and actual
revenue collection from the bankingsector. Amultiple regression method was used to ascertain
the determinants of the propensity to pay tax whilst an Ordinary Least Square
(OLS
) procedure
was used to estimate the factors that explain the tax gap. The results from the econometric
estimations of the study show that change in the factors such as non-performing loan, operating
cost, fees and commission, tax rate, inflation and Gross Domestic Product
(GDP
)have
significant effects on the tax collection and its gap. The qualitative factors such as political
intervention, tax avoidance tendency, tax evasion affect the quantitative factors significantly.
Finally, the calculations of the tax gap for thirty-six
(36)individual banks of Bangladesh for the
period of six years
(2012-2017
)were displayed. The observations, analysis, and findings of the
study suggest that ensuring internal control and compliance by banks is highly important to
manage the bank specific factors that determine the tax revenue collection and its gap.
Monitoring and observation by Bangladesh Bank should be held on regular basis in this
perspective. Tax-net should be expanded by NBR, the procedure of tax administration should be
digitalized and simplified through business process reengineering, a fully functioning research
unit should be established, a systematic methodological standard should be followed to estimate
the projected revenue properly, new tax code and rules should be enacted and implemented. The
potential of generating tax revenue is very high which needs to be captured and the revenue
composition pattern should be reversed to ensure equity and justice in the society in line with the
constitutional obligation through optimal tax policy and proper administration of tax laws
following international best practices.
