The interim government has split the National Board of Revenue (NBR) and established two separate departments under the Ministry of Finance, namely the Revenue Policy Department and the Revenue Management Department.
This is a major structural reform and the aim of this decision is to increase the efficiency of the country’s revenue system, reduce conflicts of interest and expand the scope of revenue collection by separating the revenue policy formulation activities from revenue collection and management.
Established more than fifty years ago, the NBR has consistently failed to achieve its revenue targets. Bangladesh’s tax-GDP ratio is about 7.4 percent, which is one of the lowest tax-GDP ratios in Asia (the global average is 16.6 percent, while Malaysia’s ratio is 11.6 percent). To achieve the desired development goals of the people, Bangladesh must increase the tax-GDP ratio to at least 10 percent.
Restructuring the NBR is very important to achieve this goal. A single institution should not be responsible for formulating and implementing tax policy—such a system creates conflicts of interest. It is slow and inefficient. For years, Bangladeshi businesspeople have complained that existing policies often prioritize revenue collection over fairness, growth, and long-term planning.
The long-standing problems that have plagued the NBR include:
Conflict of interest:
Having both revenue policymaking and implementation under the same roof has led to compromises in tax policy and widespread irregularities. In the current system, officials responsible for collecting taxes are not subject to any structural accountability and often compromise on the public interest in collecting taxes from tax defaulters. In many cases, tax collectors do not take action against tax evaders and instead help them for their own personal gain.
There is no mechanism or process to objectively assess the performance of tax collectors and no measurable performance indicators to assess their career progression.
Slow revenue collection:
The simultaneous emphasis on both policy formulation and institutional capacity building has reduced the importance of both. As a result, the tax net remains narrow and revenue collection lags far behind potential.
Weak governance:
The NBR suffers from inconsistent implementation of existing laws and regulations, weak investment incentives, and systemic governance issues, all of which have eroded investor confidence and weakened the rule of law.
Bureaucratic overlap:
The existing structure—where the head of the Internal Revenue Service heads the NBR—creates confusion and inefficiency, hampering effective tax policy formulation and implementation.
How the restructuring will play an effective role –
This transparent and accountable new structure is needed to address the long-standing problems:
Clear division of responsibilities:
The Revenue Policy Department will formulate tax laws, set rates and manage international tax treaties. The Revenue Management Department will oversee the implementation, audit and proper implementation of revenue policies. This separation will ensure that the tax assessment authority will not be the tax collector and will eliminate the possibility of any kind of collusion.
Improving efficiency and management:
This reform will allow each department to focus on achieving its core objectives, increase specialized skills, reduce conflicts of interest and increase transparency in institutional operations.
Expanding tax coverage and strengthening direct tax system:
This reform will expand net tax, reduce dependence on indirect taxes and strengthen direct tax collection by deploying professional and skilled manpower for appropriate work.
Improved and development-oriented policy formulation:
Instead of achieving short-term revenue collection goals alone, this dedicated policy unit will be able to develop future-oriented tax strategies.
Gaining investor confidence:
Reliable policies and a professional tax administration will play a role in attracting investment and thereby reducing private sector grievances.
Finally, this restructuring is not just a bureaucratic reshuffle, it is a necessary step towards building a fair, improved and efficient tax system. Strengthening the revenue policy-making mechanism and building a transparent tax administration are crucial to meeting the needs and aspirations of all citizens of Bangladesh.
