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Bangladesh needs to pay serious attention to three key areas, including increasing domestic revenues and building capacity, to tackle upcoming challenges, to sustain its "miraculous successful development stories" in the future, said FCDO Chief Economist Professor Adnan Khan.
During a public lecture in Dhaka on Tuesday, Mr Khan said that Bangladesh's remarkable success stories offer tremendous potential for the future.
The programme was jointly hosted by the Policy Research Institute of Bangladesh (PRI) and the Foreign, Commonwealth & Development Office (FCDO).
At the public lecture, the economist pointed out that the country is now confronted with a fresh set of development challenges, primarily related to state effectiveness.
To overcome these hurdles, Bangladesh needs to concentrate on three crucial areas: firstly, ensuring the provision of high-quality public goods and cultivating deeper, sustained capacity to do so; secondly, empowering private entrepreneurs to drive growth by enhancing productivity; and thirdly, fostering innovation and adaptability to face future challenges.
Mr Khan, formerly the Research and Policy Director at the International Growth Centre (IGC), said Bangladesh's tax-to-GDP ratio, currently below 8.0 per cent, falls short of the average for middle-income countries, which stands at 10.7 per cent.
"It needs to be increased further," he told the public lecture.
The event was chaired by PRI Chairman Dr Zaidi Sattar, while Economic Adviser to the Prime Minister Dr Mashiur Rahman was present as the chief guest.
The FCDO chief economist recommended implementing necessary structural reforms to foster trust among taxpayers and incentivise top performers within the tax collection system.
He said an improved provision of public services results in greater citizen willingness to contribute, ultimately leading to higher revenue collection.
The economist emphasised the importance of export diversification and increased foreign direct investment (FDI).
A diversified export basket and pouring in FDI, according to the economist, would enhance resilience to global shocks, promote the adoption of technology and boost productivity while providing an additional source of foreign currency earnings.
To ensure sustainability in the rapidly evolving global macroeconomic landscape, he also called for enhancing the quality of education. This, he argued, would contribute to a more productive economy.
He said the threat of climate change poses an escalating risk to growth and resilience. Projections indicate that climate change could lead to a one-third reduction in Bangladesh's agricultural GDP by 2050.
"The need for investment in adaptation is high, particularly in the delta regions," he added.
Speaking as the chief guest, Dr Mashiur Rahman said tax officials need to understand the needs of industries or businesses and conduct themselves in a manner that maintains entrepreneurs' confidence in the system.
"It is difficult to enforce the law through quasi-measures, as these measures only account for a small portion of tax leakage or erosion," he added.
Dr Rahman also argued that taxes should not only consider current income but also take into account the impact they would have on entrepreneurs.
He suggested tax rates should be set in a way that encourages taxpayers to invest more, undertake additional operations and increase production.