Boosting govt’s tax revenue earnings

FE Team | Published: April 03, 2026 20:34:12

The economy that the incumbent BNP government has inherited from the past bears the legacy of rampant corruption and politicization that distorted all vital state institutions. The tax authority, the National Board of Revenue (NBR), was no exception. Small wonder that the past regime was marked by high tax evasion, political patronage and unrealistic budgetary process causing the NBR to miss its revenue collection targets over the years. Against this backdrop, the incumbent government is planning to introduce a series of tax measures so higher revenue earnings targets could be achieved. It is worthwhile to note at this point that the country's tax-to-GDP ratio now at approximately 7 per cent is among the lowest in the world. So, the country's very low domestic revenue collection profile poses a significant challenge before the economy.
To get around the predicament, the NBR is reportedly considering introducing a slew of measures to strengthen revenue collection for the upcoming fiscal year (FY 2026-27). Those include reintroduction of wealth tax, a new inheritance tax, higher rates for the ultra-rich, and rationalizing the prevailing tax exemption regime. Such measures to boost revenue earning are now the imperative seeing that the country is faced with mounting pressure on public finances, with the government struggling to meet revenue targets amid a widening fiscal deficit and rising debt servicing costs. In this connection, the issue of wealth tax is being reconsidered as it is not quite new in this part of the world. In fact, it was in place since 1963 until it was abolished in 1999. The reasons behind abolishing the provision at that time include high administrative costs, low revenue generation and a shift towards taxing incomes and capital gains rather than accumulated assets. At that time, the factors leading to low tax generation (from wealth tax) included broad exemptions resulting in taxpayers often shifting their assets into exempt categories which reduced effective tax base. In that case, acknowledging that challenges remain regarding asset valuation and availability of the necessary data, a committee was learnt to have been formed to examine the issues in more detail.
Apart from establishing a standard procedure of asset evaluation and ensuring availability of adequate data, exercising of necessary caution would also be advisable on the part of the tax authority (while levying inheritance tax) to avoid triggering capital flight. In a similar vein, gradual phasing out of the existing system of tax exemption regime needs to be given serious consideration. That is for the simple reason that the prevailing tax system is characterized by a complex and distortionary multiple tax rates and large and regressive exemptions on VAT and income taxes. True, tax exemptions are necessary, to attract investment and generate employment. But the arrangement cannot be continued indefinitely.
It is time the beneficiaries of tax exemptions were brought under the tax net. To this end, the tax regulator, as reported, plans to raise the top marginal income tax from 30 to 35 per cent tentatively by FY2028. Notably, marginal taxation is the percentage of tax paid on each additional taka earned within a specific tax bracket rather than on total income. However, for the next fiscal year (FY2026-27), the tax regulator's focus is on raising the tax rate on individuals who earn more than Tk10 million annually by five percentage points. This is undoubtedly a welcome move. In fine, successful implementation of the steps to boost the government's revenue income through measures as envisaged by NBR would depend on expeditious automation of the tax administration. Hopefully, the tax authority would give the necessary go-ahead to the issue.