International Tax Fun Fact: Bangladesh’s National Income Tax Day
October 2, 2015
Taxation is fairly standard in the United States. Americans know that they must file their taxes by April 15th or face a myriad of penalties. The anticlimactic moment of submitting their tax returns is not very memorable, and for many of Americans, they would prefer to forget how much money they are losing.
Other countries have taken a different tack. For example, Bangladesh has a National Income Tax Day on September 15th. Far from the dreary April 15th in the U.S., Bangladesh has a state fair where citizen 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 exciting, citizen can relax while watching documentaries and dramas about the virtue of taxes.
Once Bangladeshis have been filled with the civic spirit, they can voluntarily pay their income taxes at booths on the fair grounds. Even the two major banks are on hand to help Bangladeshis pay their income taxes.
Bangladesh has some good reasons for all the tax fanfare. Bangladesh has a very narrow tax base due to a considerable amount of undocumented economic activity. This means that less than 1% of the population pays income taxes. The narrow base translates to 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 around Bangladesh.
To most Americans it seems laughable that a state tax fair would make a difference. 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. Americans are unlikely to see the President Barack Obama handing an award to Floyd Mayweather for the taxes he will pay on his $350 million earnings or a Presidential thank-you letter sent to ExxonMobil for the company’s contributions to the U.S. coffers. But Bangladesh has shown that a little gratitude for those who pay taxes can go a long way.