Bangladesh is losing $355 million in tax annually because of outward profit shifting by the corporates, particularly multinational firms, and abuses by individuals who have wealth, especially in tax havens.

Of that, the revenue-hungry country lost $335.9 million to profit shifting abroad by corporations and $19.1 million on account of tax abuse by individuals owning properties abroad, according to the State of Tax Justice 2024 report published yesterday.

The amount of tax losses is 21.4 percent of Bangladesh's health expenditures, said the report by the Tax Justice Network (TJN).

The report shows that Bangladesh is one of the countries that altogether are losing $492 billion in tax a year to multinational corporations and wealthy individuals using tax havens to underpay taxes.

And nearly half the losses are enabled by the eight countries: Australia, Canada, Israel, Japan, New Zealand, South Korea, the UK and the US, it added.

The report comes at a time when Bangladesh suffers from a shortage of required taxes to finance its annual development and operating expenditure.

The country's revenue-to-gross domestic product (GDP) ratio is estimated at 8.5 percent at the end of fiscal year 2023-24, one of the lowest in the world, according to a World Bank report.

In Bangladesh, tax irregularities and incidents of tax evasion are rampant.  

The TJN in its State of Tax Justice report last year said the country's annual losses for corporate abuses amounted to $396 million. And firms shifted $1.48 billion of profits from Bangladesh, according to the previous report.

In the latest report, TJN said multinational companies shifted $1.03 billion away from Bangladesh which accounted for 0.1 percent of Bangladesh's roughly $460 billion economy.

The TJN said despite reduced corporate tax rates, multinational corporations shifted more profits into corporate tax havens, rising to the highest value yet recorded in the State of Tax Justice reports.

Bangladesh has also reduced its corporate taxes in the last one and half decades to encourage firms to invest more in the country, create jobs and drive the country's economic growth.

The National Board of Revenue (NBR) has cut corporate tax to 27.5 percent in the fiscal year (FY) 2023-24 from 40 percent in FY08.

TJN said the theory that cutting corporate tax rates can generate more tax revenue and vice versa often has been long debunked.

It said of the $492 billion lost to global tax abuses a year, two-thirds are lost to multinational corporations shifting profit offshore to underpay tax. The remaining third is lost to wealthy individuals hiding their wealth offshore.

In the statement by TJN, Liz Nelson, director of advocacy and research at the network, said tax is our most powerful tool for choosing the kind of societies we want to live in.

"Our governments chose to use tax as a tool to make the super-rich and their corporations even richer, thinking this would make our economies stronger. The data shows this had the opposite effect. Higher levels of extreme wealth, fuelled by ever-growing global tax abuse, have made our economies insecure, households worse off and our planet unstable," Nelson said.

"People in countries around the world are calling in large majorities on their governments to tax multinational corporations properly. But governments continue to exercise a policy of appeasement on corporate tax."