Bangladesh’s direct tax expenditure surpasses South Asian and global lower-income country averages, according to the “Tax Expenditure in the Direct Tax of Bangladesh” report. Direct tax expenditure in Bangladesh amounts to 3.56% of its national GDP, exceeding the maximum limit of other lower-income countries by 1.06%. South Asian, Sub-Saharan African, East Asian, and Pacific countries typically set their maximum tax expenditure limits between 2.1% and 2.7% of their GDP.
The incentives are intended to promote specific economic activities, support certain groups, and align behaviors with public policy goals. Corporate income taxpayers account for 68% of the estimated direct tax expenditure in FY21, with personal income taxpayers making up the remaining 32%. The study suggests eliminating or capping ineffective expenditures and enhancing reporting and transparency to improve the tax system’s effectiveness, efficiency, fairness, and transparency.
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