Bangladesh's revenue collection has grown more slowly than the economy over the past decade. That means, though the economy has expanded significantly, the tax system has failed to capture the newly generated wealth. Overreliance on manual processes, paper-based auditing and fragmented digital registries points to a structural flaw. As a result, the tax base remains too narrow leaving large sectors of the economy untaxed or undertaxed. In fact, this outdated taxation system cannot keep track of wealthy earners, underreported land values as well as big cash transactions. In this connection, the finance ministry's finance division, which handles the government's expenditures and budget-making, in an analysis showed that the country's average revenue buoyancy-a measure of how quickly the government revenue grows relative to the economy- stood at 0.93 between fiscal years 2014-15 and 2024-25. Notably, a coefficient below 1.0 indicates a revenue growth that is trailing economic expansion, which is basically the reality on the ground. Against this backdrop, the finance division has outlined its tax and revenue strategies in its 'medium-term macroeconomic policy statement (MTMPS)'. These strategies highlight persistent revenue underperformance and prescribe ways to broaden the tax base, automate systems and foster an 'investment-production-employment-consumption-tax' cycle.
Also, the MTMPS and the associated medium-and long-term revenue strategy (MLTRS) emphasize some key policies. Those include gradually introducing faceless tax assessments, automated taxpayer appeals and e-challan systems to reduce administrative loopholes and human discretion. It would also help improve taxpayers' trust and strengthen voluntary compliance with the tax payment system, finance official reportedly informed. In that case, if implemented with consistency and institutional discipline, these reform measures could significantly enhance revenue collection, strengthen fiscal resilience and support Bangladesh's long-term development financing needs. These reform measures are pertinent to strengthening the tax regulator, the National Board of Revenue (NBR)'s revenue generation capacity in the context of the incumbent administration's ambitious budget worth Tk9.38 trillion for the next financial year FY (2026-27).
To finance this big budget, the administration has entrusted NBR with a highly challenging task of meeting a revenue target of Tk6.04 trillion, where the best yearly record reached so far by the NBR is Tk3.61 trillion. The fact that there is a consistent gap of 13 to 15 per cent between the revenue targets set and what achieved annually has also been corroborated by the finance division's medium term policy statement. Which is why, experts also view the FY27's revenue target highly challenging. It is also worth considering at this point that this wide revenue gap has led to a low tax-to-GDP ratio at 7.9 per cent in 2025. Consider that in the same year, Bangladesh's South Asian neighbour, Bhutan, recorded a revenue-to-GDP ratio at 27.8 per cent, followed by India at 21 per cent and Nepal at 20 per cent. Obviously, to overcome revenue deficit, alongside structural reforms in the tax administration and tax policy, automation is urgently required for tapping the potential revenue sources.
Such potential sources of revenue lie, for instance, in the agriculture sector and in the extensive informal economy, which are still beyond the formal tax net. It would also be worthwhile to note that there is a significant and persistent gap between the number of Taxpayer Identification Number (TIN) and actual income tax return filings. In FY25, for instance, the number of registered TIN holders rose to 12 million, but 62 per cent of them failed to submit returns resulting in a huge compliance gap. Needless to say, the lacunae pose major challenges to effective tax administration. The reassuring development to note here is that in the outgoing fiscal year FY26, the mandatory online filing has driven a significant rise in submissions as of March last. The trend clearly suggests that despite systemic inertia, mandatory digitalisation is improving compliance as well as promising a more disciplined tax regime.
