Despite years of steady economic growth, Bangladesh is facing a hidden budget crisis because its tax system collects far less money than it should. This study looks closely at why tax revenues stay stuck at a low 7-9 per cent of the national economy, leaving the government short on funds for everyday public needs. The findings show that Bangladesh loses out on 5.89 per cent of its economic output in unpaid taxes each year, mainly because only 3.57 per cent of workers pay income tax and fewer than one in four registered companies bother to file tax returns. This creates a deeply unfair setup: while the wealthiest 10 per cent of families hold 76 per cent of all private wealth, income tax brings in less than 1 per cent of total national income. To make up for the loss, the country relies heavily on everyday sales tax (VAT), which hits regular people hardest, forcing the poorest families to hand over 20 per cent of their income in taxes while the richest pay less than 3 percent.

Keywords: Tax Revenue, Tax Evasion, Fiscal Deficit, Income Inequality, Wealth Concentration, Regressive Taxation