Bangladesh stands at a critical fiscal juncture. The initial revenue target of Tk 4.99 lakh crore was later revised to Tk 5.54 lakh crore. However, by February 2026, the revenue shortfall had already exceeded Tk 70,000 crore. At the same time, increased public spending commitments—including family cards, farmer support programs, interest waivers, and infrastructure initiatives—may further widen the fiscal gap unless sustainable revenue sources are secured. Without effective reforms, the risk of a growing national debt burden cannot be ignored.
To ensure sustainable economic growth, Bangladesh must strike a careful balance between prudent public spending and efficient revenue collection. Taxpayers should be treated as partners in nation-building rather than merely sources of revenue. A modern revenue framework can be built around three key pillars:
The National Board of Revenue (NBR) should establish full interoperability among income tax, VAT, and customs systems while connecting relevant government and private-sector databases. Prefilled tax returns and faceless taxpayer services can significantly reduce compliance costs, improve transparency, and minimize corruption.
Introducing a VAT refund mechanism for consumers based on valid e-invoices would encourage citizens to actively demand VAT-compliant transactions. Since VAT reflects business sales and income tax is linked to profits, ensuring accurate sales reporting will strengthen overall tax collection.
A Central Cashless Unit under Bangladesh Bank should accelerate digital payment adoption and ensure practical implementation of existing tax provisions related to cashless transactions. Greater transparency in financial transactions will improve compliance and reduce tax evasion.
To reduce administrative costs, improve efficiency, and eliminate bureaucratic complexities, policymakers should consider creating a unified revenue authority by integrating income tax and VAT administration.
Key reforms include:
Aligning tax policy and administration to maximize revenue collection effectively.
Replacing the traditional circle-based income tax structure with specialized functional units focused on audit, intelligence, dispute resolution, taxpayer services, and arrears recovery.
Conducting customs, VAT, and income tax audits simultaneously to reduce duplication and improve efficiency.
Although Bangladesh has more than 1.28 crore e-TIN holders, only around 46 lakh file returns regularly. Similarly, only a fraction of VAT-registered businesses submit VAT returns.
Key measures include:
Cleaning TIN and BIN databases by removing inactive, deceased, closed, and ghost taxpayers.
Using digital third-party data to identify new taxpayers.
Strict implementation of Proof of Submission of Return (PSR) requirements.
Introducing VAT Registration Verification (PSVR) mechanisms.
Revenue growth should come from expanding the tax base rather than increasing pressure on existing taxpayers. Recommended actions include:
Reviewing and gradually phasing out blanket tax exemptions.
Setting reasonable tax rates to encourage voluntary compliance and reduce evasion.
Developing research-based strategies to improve taxpayer compliance.
Strengthening the capacity and accountability of tax officials through training and evaluation.
Ensuring fast and hassle-free refunds of excess taxes directly to taxpayers' bank accounts.
Small and medium enterprises are the backbone of Bangladesh's economy. Simplified accounting requirements, favorable tax treatment, and temporary presumptive tax systems can encourage formalization without discouraging entrepreneurship.
The government may consider a final opportunity until 30 June 2026 for declaring undisclosed assets with installment payment facilities. Following this period, enforcement should become strict, impartial, and evidence-based.
All tax audits should be selected using risk assessment and evidence-based criteria rather than arbitrary selection.
Increasing revenue does not require placing additional burdens on compliant taxpayers. Through digitalization, structural reforms, broader tax participation, and stronger compliance mechanisms, Bangladesh can build a modern, transparent, and equitable tax system capable of supporting long-term economic growth and fiscal sustainability.
