The Tendency of Tax Evasion in Bangladesh: Causative Factors and Possible Remedies

Abstract

The government uses taxation as a vital policy instrument to generate public spending funds while also considering broader objectives such as equity, efficiency, and fiscal autonomy. Tax evasion substantially impedes the effective implementation of tax policies throughout the world. The economy of Bangladesh, which is quickly becoming one of the fastest-growing in the world, is seriously concerned about the low tax-to-GDP ratio. Bangladesh encounters a notable prevalence of tax evasion, resulting in both disparities in income distribution and a deficit in the budget allocated for development finance. This study endeavoured to identify the determinants influencing individuals' propensity to engage in tax evasion. It aimed to examine the impact of many factors, including involvement with the tax system, incentive to pay taxes, ethical arguments surrounding tax evasion, and knowledge of tax evasion and the tax system, on the likelihood of individuals in Bangladesh engaging in tax evasion. Besides, this study aimed to examine how demographic characteristics influence the inclination to engage in evasion. In order to achieve a favourable outcome, this study had a sample size of 102 participants from various regions of the country, who were surveyed to gather relevant data. The findings indicate that participation in the tax system, willingness to pay taxes, ethical considerations surrounding tax evasion, familiarity with tax evasion practices, and annual income influence tax evasion. This study also suggested ways to reduce tax evasion in Bangladesh based on interviews with two economists and one tax professional.