As April 15th approaches, many American rush to collect their taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. documents and fill out the appropriate paperwork. This stressful, yearly event is not that same around the world. For example, Bangladesh has their National Income Tax Day on September 15th. Far from the dreary April 15th in the United States, Bangladesh has a state fair where citizens can learn to file their taxes at a tax clinic, take part in tax rallies, and even watch an award ceremony for the highest tax payers. If that is too much excitement, Bangladeshis can relax while watching documentaries and dramas about the virtue of paying taxes.
Once Bangladeshis have been filled with the civic spirit, they can voluntarily pay their income taxes at booths on the fair grounds. Booths are separate into men, women, disabled people, and senior citizens to increase the comfort of the tax payer. Even the two major banks are on hand to help Bangladeshis pay their taxes.
Bangladesh has some good reason for all the tax fanfare. Bangladesh has a very narrow tax baseThe tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates. due to a considerable amount of undocumented economic activity. This means that less than 1% of the population pays income taxes. The narrow base means a heavy tax burdens on those who conduct documented transactions and low tax revenues for the government. This translates to a tax-to-GDP ratio of 9.3%, much less than other countries in the region.
To most Americans it seems laughable that a tax fair would encourage Bangladeshis to pay their taxes. Some would argue that Bangladesh needs to increase enforcement and penalties to scare citizens into paying their taxes, but Bangladesh’s softer touch is improving the compliance rate. The number of taxpayers who submitted tax returns increased by 180% from the previous year.
Bangladesh’s soft approach to tax avoidance has lessons for the West. Although Americans are unlikely to see President Barack Obama handing an award to Floyd Mayweather or a Presidential thank-you letter sent to ExxonMobil for the company’s contributions to the U.S. coffers, a little gratitude for those who pay taxes can go a long way. Rather than only sending a postcard when a tax payer is about to auditA tax audit is when the Internal Revenue Service (IRS) conducts a formal investigation of financial information to verify an individual or corporation has accurately reported and paid their taxes. Selection can be at random, or due to unusual deductions or income reported on a tax return. ed, maybe the IRS could send some thanks you cards to tax payers who filed early and paid additional taxes out of pocket. Maybe April 15th wouldn’t be such a bad day if there was a little more appreciation for the American tax payers.
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