An exhaustive package of dos framed by an expert panel asks the government to abolish zero-rated duty and all concessionary rates and the practice of making midterm changes in duties to maximize state revenue.
The 552-page report of the 12-member taskforce assigned to reframe economic and financial development strategies of Bangladesh, submitted on February 11, 2025 to Planning Adviser Dr Wahiduddin Mahmud, views that any duty concessions under special circumstances must be approved by parliament or competent authority before or within three months.
"Abolish the exemptions of tax in respect of capital-gains and, in deserving cases, these may be taxed at preferential rates," says the report titled 'restrategising the economy and mobilising resources for equitable and sustainable development'. Midterm changes to duty through SRO except in special cases like natural disasters and other emergencies should not continue while duty concessions without obligations to international treaties or strong humanitarian reasons must be done away with.
The taskforce, headed by former Director-General of the Bangladesh Institute of Development Studies (BIDS) KAS Murshid, in its report's revenue-mobilisation part suggests a number of measures that can help the country widen the tax base, enhance efficiency and improve the tax-to-GDP ratio.
Senior revenue board officials say the report has yet to reach, through proper channel, the National Board of Revenue (NBR).
Md Abdur Rahman Khan, Chairman of the NBR, says the revenue board is working on several reform proposals to improve its efficiencies.
"We hope reflection of our work on reform proposals would be visible in the upcoming budget," he told The Financial Express on Saturday.
The interim government-formed panel has recommended phasing out all supplementary and regulatory duties in keeping with the requirements for Bangladesh's LDC graduation, set for next year.
With a substantial depreciation of the taka, the reduction in such duties may ease inflation pressure on imported items.
"A tax policy analysis division may be instituted under the Internal Resource Division with a full-fledged Secretary in place and the NBR chairman should be entrusted with tax-revenue -collection operations," the taskforce recommends in its report.
Tax officials say a move has already been made to separate the tax-policy wing from tax implementation.
The BCS taxation and customs association has also submitted a repirt on the structure of the decoupling.
However, NBR officials hold the view that the separation must follow the right procedure to keep uninterrupted flow of tax -revenue receipt.
The taskforce has also recommended automating VAT -and tax-return submission immediately.
"Though online tax return was introduced on a selective basis this year (2024), it must be expanded for all gradually by the next year in a simplified format."
Introduction of a centralised system, abolishing zoning system, to allow taxpayers to pay taxes wherever they like are also among the cardinal reform measures laid down in the exhaustive report.
"The zoning system in the age of digitisation is redundant."
Now taxes are collected across taxes zones, which creates an opportunity for respective officials to take undue favours or commit corruption as the zone provides them the opportunity to be familiar with the respective taxpayers.
Also in focus of the expert recommendations are improving the capacity of the NBR by arming the board with adequate manpower and logistic support, research-and-monitoring facility, and strengthening its intelligence and audit system.
"Conduct surveys to identify potential taxpayers and barriers to paying taxes," the panel calls upon those in authority over the country's exchequer.
Procedural reforms have also been recommended, like reframing the customs -clearance process to make it more efficient and less time-consuming, discontinuing the diplomatic bonded warehouses, a review of duty drawback, rates, and coefficients and revising those accordingly, regularly reviewing and framing adequate safeguard duty rules to combat unfair international trade, and withdrawal of manual submission of VAT returns that have already been submitted online.
Also laid emphasis on local-level taxes through several institutional and policy changes.
"While the government may look up the Report of the Local Finance Commission set up in the mid-1990s, there is a scope for rationalising the immovable -property tax as well as the urban land-development tax."
The report recommends making upward revision in the tax rate by reviewing the land prices every five years, bringing large agricultural landowners under the tax net, imposing location-specific higher and differential tax rates for land used for residential and commercial purposes in large cities, like Dhaka, Chittagong and other city corporations, and applying the same principle of parity in other cities and upazila headquarters.
"Implementation of the tax-modernisation plan has not been as fast as expected as well as the tax-administration enhancements have been below expectations due to delays in the automation of the tax system," the taskforce deplores.
The expert opinion says narrow tax base combined with the monetary waste for exemptions and tax holidays has hindered expected tax collection.
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