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The Political Economy of Domestic Tax Reform in Bangladesh: Political Settlements, Informal Institutions and the Negotiation of Reform

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  • Mirza Hassan
  • Wilson Prichard

Abstract

This paper explains the persistence of a tax system characterised by low revenue collection and extensive informality in Bangladesh. It combines analysis of long-term formal and informal institutions and of micro-level incentives shaping negotiation of short-term reform. The system is unusually informal, discretionary, and corrupt, but remains resistant to change because it delivers low and predictable tax rates to business, extensive opportunities for corruption to the tax administration, and an important vehicle for fundraising by political leaders and rent distribution to their elite supporters. We then explore the dynamics of micro-level reform and external pressure within the constraints of this overarching political bargain.

Suggested Citation

  • Mirza Hassan & Wilson Prichard, 2016. "The Political Economy of Domestic Tax Reform in Bangladesh: Political Settlements, Informal Institutions and the Negotiation of Reform," Journal of Development Studies, Taylor & Francis Journals, vol. 52(12), pages 1704-1721, December.
    • Handle: RePEc:taf:jdevst:v:52:y:2016:i:12:p:1704-1721
    DOI: 10.1080/00220388.2016.1153072
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    References listed on IDEAS

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    1. Prichard, Wilson & Cobham, Alex & Goodall, Andrew, 2014. "The ICTD Government Revenue Dataset," Working Papers 10250, Institute of Development Studies, International Centre for Tax and Development.
    2. Bird, Richard M., 2008. "Tax challenges facing developing countries," Working Papers 08/als1, National Institute of Public Finance and Policy.
    3. Hassan, Mirza & Prichard, Wilson, 2013. "The Political Economy of Tax Reform in Bangladesh: Political Settlements, Informal Institutions and the Negotiation of Reform," Working Papers 10248, Institute of Development Studies, International Centre for Tax and Development.
    4. Prichard, Wilson, 2010. "Taxation and state building: towards a governance focused tax reform agenda," Working Papers 908, Institute of Development Studies, International Centre for Tax and Development.
    5. repec:idb:brikps:publication-detail,7101.html?id=4565 is not listed on IDEAS
    6. Mr. David Kloeden, 2011. "Revenue Administration Reforms in anglophone Africa Since the Early 1990's," IMF Working Papers 2011/162, International Monetary Fund.
    7. Mirza Hassan, 2013. "Political settlement dynamics in a limited-access order: The case of Bangladesh," Global Development Institute Working Paper Series esid-023-13, GDI, The University of Manchester.
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    Cited by:

    1. Ali, Tariq Omar & Hassan, Mirza & Hossain, Naomi, 2021. "The moral and political economy of the pandemic in Bangladesh: Weak states and strong societies during Covid-19," World Development, Elsevier, vol. 137(C).
    2. Khadiza Begum, 2024. "Tax Reforms in Bangladesh: An Overview," International Journal of Science and Business, IJSAB International, vol. 35(1), pages 1-14.
    3. Sèna Kimm Gnangnon, 2023. "Trade costs and tax transition reform in developing countries," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(4), pages 941-977, October.
    4. Sena Kimm Gnangnon, 2023. "Effect of the Shadow Economy on Tax Reform in Developing Countries," Economies, MDPI, vol. 11(3), pages 1-49, March.
    5. Pallavi Roy & Mushtaq H. Khan, 2021. "Digitizing Taxation and Premature Formalization in Developing Countries," Development and Change, International Institute of Social Studies, vol. 52(4), pages 855-877, July.
    6. Hassan, Mirza & Prichard, Wilson, 2016. "The Political Economy of Domestic Tax Reform in Bangladesh: Political Settlements, Informal Institutions and the Negotiation of Reform," Working Papers 13681, Institute of Development Studies, International Centre for Tax and Development.
    7. Prichard, Wilson, 2016. "Electoral Competitiveness, Tax Bargaining and Political Incentives in Developing Countries: Evidence from Political Budget Cycles Affecting Taxation," Working Papers 13713, Institute of Development Studies, International Centre for Tax and Development.
    8. Bolch, Kimberly B. & Ceriani, Lidia & López-Calva, Luis F., 2022. "The arithmetics and politics of domestic resource mobilization for poverty eradication," World Development, Elsevier, vol. 149(C).

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