The Advisory Committee on Reforms to the National Board of Revenue (NBR) is likely to submit its second interim report next month, according to a member of the committee.
“This time the report will be on the automation system of the NBR, we have almost finished the report, hopefully we will be able to submit it next month,” the member told UNB, on condition of anonymity.
He said that in this report the Committee will give a proposal to fully automate the NBR's systems using technology in the next 4-5 years.
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“We will give some philosophy and the process to automate the NBR,” he said.
The Reform committee, formed on October 9, 2024, comprises two former NBR chairmen—Muhammad Abdul Mazid and Dr. Nasiruddin Ahmed—and three former NBR members: M Delowar Hossain, Farid Uddin, and Aminur Rahman.
The Committee member mentioned that over the years there was some automation in the NBR, but it was done in a piecemeal manner.
“It was not done in a total manner, we will point out the specific areas where the automation is needed and we will propose the way for this automation,” he said.
He said that last time the proposal was on separation and the next one will be on automation. “By these two proposals, we will be able to complete 60 percent of the proposal on reform,” he added.
He said that the rest of the reform will be done on the laws of income tax, customs and VAT.
“For that we will go line by line of the laws, we will do hair-splitting analysis,” he said.
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The Committee member also said that through the analysis they will pinpoint the inevitable reform in these laws. “Later, we will summarize those and submit it to the concerned ministry,” he said.
The committee in its first report highlights that Bangladesh’s current tax policy deviates significantly from international best practices, which typically feature low rates, minimal exemptions, a broad base, progressive income tax structures, and value-based taxation.
These deviations are seen as impediments to investment, revenue growth, and the establishment of economic and social justice.
A central recommendation of the report is to address the inefficiencies arising from the dual role of the Secretary of the Internal Resources Division (IRD) and the NBR Chairman, both positions currently held by the same individual.
This overlap is identified as a significant barrier to effective governance within the NBR. To mitigate this, the committee proposes the establishment of an independent “Revenue Commission” responsible for policy development, while the restructured NBR would focus on policy implementation and revenue collection.
The committee emphasizes the importance of stakeholder engagement in the reform process. It has reached out to private sector associations, including the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), the Metropolitan Chamber of Commerce and Industry (MCCI), and the International Chamber of Commerce Bangladesh (ICCB), seeking their proposals to guide its reform efforts. This collaborative approach aims to ensure that the reforms are comprehensive and considerate of various perspectives.
Recognizing the complexity of the proposed reforms, the committee acknowledges that while the recommendations are implementable, they cannot be executed overnight. It emphasizes the need for a phased approach, building consensus among all stakeholders to ensure the sustainability and effectiveness of the reforms.
These recommendations come at a time when the NBR is facing significant challenges in revenue collection. In the first six months of the fiscal year 2024-25, the NBR reported a revenue collection deficit of approximately Tk 57,891 crore, with shortfalls across income tax, import duty, and VAT sectors. This deficit underscores the urgency for systemic reforms to enhance the efficiency and effectiveness of the tax administration.
The Advisory Committee’s interim first report sets the stage for a transformative overhaul of Bangladesh’s tax system. By addressing structural inefficiencies, engaging stakeholders, and proposing actionable reforms, the committee aims to create a more equitable and efficient tax administration that supports the country’s economic growth and social justice objectives.
Meanwhile, International Monetary Fund (IMF) has outlined several conditions for the National Board of Revenue (NBR) in Bangladesh to enhance revenue collection and improve fiscal stability.
These are included: Restructuring Personal Income Tax, Reducing Tax Exemptions, Implementing a Uniform VAT Rate, Separating Tax Policy and Administration, Increasing the Tax-to-GDP Ratio and Assessing Tax Expenditures.
The IMF suggests increasing the tax-free income threshold from Tk 3.5 lakh to Tk 5 lakh and eliminating the 5% tax slab. This adjustment aims to simplify the tax structure and promote fairness.
To broaden the tax base, the IMF recommends a thorough evaluation of existing tax exemptions and the elimination of less effective ones. This measure seeks to enhance revenue by minimizing unnecessary concessions.
The IMF advocates for a standardized 15% Value Added Tax (VAT) across all sectors, replacing the current system of varying rates. This uniformity is intended to simplify compliance and boost revenue.
Structural reforms, such as dividing tax policy formulation from tax administration, have been recommended to improve efficiency within the NBR. This separation is expected to enhance policy implementation and revenue collection.
The IMF has set a target to raise Bangladesh’s tax-to-GDP ratio by 0.6% in the current fiscal year, emphasizing the need for enhanced revenue mobilization to support economic growth and stability.
The NBR is encouraged to assess tax expenditures, including rebates and exemptions, to identify areas for rationalization. This assessment aims to streamline tax incentives and improve fiscal efficiency.
These conditions are part of the IMF’s broader support program to strengthen Bangladesh’s fiscal framework and promote sustainable economic development.