Money
Laffer Curve
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The Laffer Curve is a theoretical illustration of the relationship between tax rates and total government tax revenue.
Key concepts: At 0% tax rate, revenue is zero (no tax means no income). At 100% tax rate, revenue is also zero (nobody would work if all income is taxed). Between these extremes, there's an optimal rate that maximizes revenue.
The curve shows that raising taxes beyond the optimal point actually reduces revenue — because high taxes discourage work, encourage tax evasion, or drive capital out of the country.
In Bangladesh, with a tax-to-GDP ratio of only 7-8%, the Laffer Curve concept is important. The challenge is finding the right tax rate and broadening the tax base to maximize revenue.