Assessing the impact of indirect taxation on poverty and inequality: A pseudo-panel data analysis on Bangladesh and global insights from cross-country panel regressions
This study utilises household-level survey data and a cross-country panel to establish a causal relationship between indirect taxation and poverty, inequality, and economic growth in Bangladesh.
-
Razzaque et al. Policy Brief September 2024.pdf
PDF document • 157.29 KB
- In Bangladesh, almost two-thirds of revenue is derived from indirect sources, particularly regressive taxes like a value-added tax (VAT).
- This study investigates the impact of the indirect tax burden on household poverty levels in Bangladesh, employing both pseudo-panel analysis and cross-country panel analysis.
- Findings suggest that each 1% increase in the indirect tax burden leads to a 0.42% rise in poverty – revealing the importance of reducing reliance on indirect taxation and utilising progressive taxation to address income inequality and bolster government revenue.
- This brief suggests a phased tax reform initiative spanning 10-15 years, prioritising broadening the tax base, modernising tax administration, and shifting from traditional policing and threats to more user-friendly and automated technology.