M. S. Siddiqui
Legal Economist
e-mail: shah@banglachemical.com
Many factors contribute to today’s rising inequality. The gradual decline in completion is the major factor for raising inequality.
The powerful lobby has taken over the development project contracts with active support of regulators. The rise of winner-take-all-economies in business, music, sports, film, and many other fields, misrule and above all corruption.
Furthermore monopoly, like most forms of concentrated power, is often brought to bear against the least advantaged in an unequal society. The rapid rise in monopolization in the market of essential goods and services has also increased inequality in several ways. Monopolization means the powerful can charge citizens more for such basic goods and services such as essential basic foods, health care, housing, and travel.Many manufacturers of essential products like sugar, edible oil are going out of the market leaving few to control the prices. The service charge for obtaining the work permit and airfare to Middle Eastern countries, and even the airfare for travelling to Mekka for Hajj also controlled by few influential companies.
It is said thatBangladesh is set to be among the fastest-growing economies in the world, but inequality in income distribution among people is also at its peak.Inequality and unequal distribution of wealth between the rich and the poor have a large negative impact on social cohesion, equity and justice. It remains a concern for marginalized people who are encountering livelihood challenges that are growing faster.
The promoter of free economy advocates that despite inequality the ultra-poor also get some benefits of ‘trickle down economics’ but it has not translated into reality. Instead, it has given us stagnating wages, crumbling infrastructure, failing public services, and destabilized the very institution of democracy. These challenges will only worsen if you fail to address extreme wealth inequality.
Not only millionaires, it is often argued that there indeed are billionaires in Bangladesh, but they are hiding all their wealth in offshore Bank accounts and real estate. Their apprehension would be justified given that 11 Bangladeshis were named in the Pandora Papers for hiding their wealth in a tax heaven. It is indeed difficult to estimate the amount of capital outflow, as well as tax evasion in Bangladesh, make it difficult to estimate the real wealth of many individuals. This lack of reporting may be a contributor to Bangladeshi billionaires are not being included in the global list.
The black money holders in Bangladesh are reportedly the rich people in the country. Some of them do not feel safe keeping their money in the country and easily transfer the money to other countries. Currently, the United Arab Emirates (UAE) used to be the largest source of overseas remittance for Bangladesh. On the other hand, certain cities of UAE have become the major hubs of investment for Bangladeshis. Bangladeshis have invested in villas, flats, small hotels, starred hotels and all sorts of property and businesses in these places. Based on records of the US-based Centre for Advanced Defense Studies (C 4 ADS), the EU Tax Observatory says that 459 Bangladeshis have bought property in Dubai, concealing information. Till 2020, records show they have bought 972 properties there, worth around USD 315 million (USD 31.5 crore). That is equivalent to around Tk 35 billion (Tk 3500 crore) in Bangladesh currency.They of course did not pay their due taxes.
The tax department is unable to give any population of billionaires and millionaires in the country. Bangladesh’s Tax to GDP ratio stands at an abysmal 9 percent. The direct taxation system is hardly progressive, and tax evasion isrampant. According to a Finance Ministry research, 45-65 percent of Bangladeshis assets are not taxed.
At the end of June 2023, the number of account holders (depositors and borrowers) of more than Tk 1 crore in the country’s bank sector stood at 2 lakh 49 thousand 689. But this is just a recorded number. Beyond this there are many millionaires and there is no precise account of their wealth. In December 2008, the total number of millionaire depositors in the bank sector was 19,163.
Bangladesh is the third after Nigeria and Egypt for growth in the number of high net-worth individuals in the world in the next five years, according as predicted in a 2019 report of New York-based research firm Wealth-X. The US-based research firm Wealth-X defines individuals with a net worth more than Tk300 crore ($30 million) as ultra-high net worth or ultra rich. Bangladesh is ahead of Vietnam, Poland, China, Kenya, India, the Philippines and Ukraine.
It is an established perception that rich persons do not pay tax in Bangladesh.Rich peopledon’t pay their fair share in taxes. In contrast, in the western world, millionaires and billionaires are asking for imposed of wealth tax on them. These billionaires and millionaires have released a letter demanding that elected leaders should impose tax on the extreme wealth they possess. Their request is simple to tax them,the very richest in society.
On the other hand, a survey conducted on behalf of the patriotic millionaires over 2300 respondents from G20 countries who hold more than $1 million in investable assets, excluding their homes – making them the richest 5 percent and higher. A full 75% of respondents–again, all of which are wealthy by any reasonable measure–support introducing a 2% wealth tax on billionaires, as proposed by the EU Tax Observatory in October 2023. And 74% support higher taxes on wealth to help address the cost-of-living crisis and improve public services. 72% think that extreme wealth helps buy political influence, and 54% think that extreme wealth is a threat to democracy itself.Imposing a 2% tax on the world’s billionaires alone would raise almost $250 billion annually, according to a recent report by the EU Tax Observatory.
Low tax-to-GDP ratios are prevalent, and tax systems are failing to collect the revenues. The tax-to-GDP ratio in Bangladesh is extremely low, around 7.5 per cent–9 per cent, the lowest in South Asia and, on average, almost 5 per cent less than in lower-middle-income countries.
Despite the remarkable economic and social development in the last 50 years and being on track to get the lower-middle-income tag, the country is in sharp contrast in terms of equity and justice. The rich are becoming richer faster and accumulating wealth, while the bottom half of the population is still struggling for simple livelihood, employment and social protection. The current statistics on income share for the bottom 40 per cent of people are 21 per cent, and for the richest 10 per cent of the population, it is 27 per cent. Oxfam earlier revealed that the world will likely have its first trillionaire by 2034.
The world’s rich and elite mostly of OECD countries attended the annual meeting of the World Economic Forum in Davos in early January 2024 and offer to pay more wealth tax. It’s a message that comes as the charity. More than 250 billionaires and millionaires also have signed on to an open letter calling for wealth taxes to pay for public services around the world. The letter mentioned that “If elected representatives of the world’s leading economies do not take steps to address the dramatic rise of economic inequality, the consequences will continue to be catastrophic. This will not fundamentally alter our standard of living, nor deprive our children, nor harm our nations’ economic growth. But it will turn extreme and unproductive private wealth into an investment for our common democratic future.”
These rich peoplein OECD countries believe that additional tax ‘will not fundamentally alter their standard of living, nor deprive our children, nor harm the nations’ economic growth. But it will turn extreme and unproductive private wealth into an investment for our common democratic future.’ Failure to reduce inequality by taxing the rich more, the signatories argue, only entrenches the status quo and threatens democratic norms. Unfortunately, the rich people in developed countries earned many and pay tax but in developing countries like Bangladesh, people of different professions earned money illegally and donot pay tax at all.The transfer the money to other countries through hundi.
The market competition can reduce the gap between the citizens with action to prevent corruption and mismanagement of national wealth. The market should duly be regulated to prevent the rise of monopoly in various sectors. Bangladesh policy makers should take immediate action to promote competition in various sectors to reduce the gap of income between different segment of citizens.
