Tax Expenditures in Bangladesh: An Introductory Analysis

This policy note attempts to introduce the concept and size of tax expenditures in the context of Bangladesh with special references to experiences of India and Pakistan. It shows that the amount of tax expenditures in Bangladesh is 2.52 per cent of GDP in FY05, in which expenditures in the direct taxes and indirect taxes are 0.28 per cent and 2.24 per cent, respectively. The note identifies that tax expenditure accounting is necessary to establish an efficient and effective tax system as well as fiscal accountability and transparency in the country, since tax expenditures are viewed as part of government expenditures. Thus, a detailed assessment of tax expenditures including an appropriate definition and a methodology for measuring ‘tax expenditures’ is essential along with restructuring the existing tax expenditure measures in Bangladesh.