Raising Personal Income Tax to Boost Economic Growth
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The Importance Of Personal Income Tax For Driving Economic Growth
Personal income tax has proven to be an important tool in raising tax revenue and supporting the growth of emerging economies. As countries develop, they increase their general tax revenue share as a proportion of GDP, but they also increasingly utilise personal income tax to raise revenue. Bangladesh raised tax revenue at a rate of only 8.4 % of GDP in FY2021-2022 – much lower than other comparable countries – and only a third of this tax revenue was raised through direct (corporate and personal) taxation – again lower than that of other similar countries (Table 1). In its 8th Five Year Plan, the Bangladesh national government committed to increasing tax revenue to 12.3% of GDP by 2025.
PRI Study Centre On Domestic Resource Mobilisation Has Conducted New Modelling To Estimate The Effects Of Increasing Revenue From Personal Income Tax
PRI Study Centre on Domestic Resource Mobilisation have carried out new taxation modelling to estimate the impacts of changes to the personal income tax system. This uses data on Bangladesh’s economy to simulate the impacts of possible revenue and expenditure reforms. The modelling provides estimates for resulting changes in economic variables including tax revenue, GDP, household consumption and income distribution.
