Dhaka, July 22 -- It has become a standard refrain in the lexicon of international development institutions and local protagonists: Bangladesh suffers from an abysmally low tax-to-GDP ratio. At barely 7.5 per cent, it trails not only global averages but also regional peers such as Nepal, whose ratio hovers around 18 per cent. The International Monetary Fund (IMF), World Bank, and many in the Bangladeshi policy community often argue that this deficiency undermines the country's ability to mobilise resources for infrastructure, health, education, and other developmental priorities. The prescription offered is almost always the same: broaden the tax net, if not raise the tax rate.

While the argument has surface appeal, it is ultimately mech...