Expanding tax net should be the fiscal priority

The biggest strength of Bangladesh is its huge population and expanding economy, especially in garments, remittances, agriculture, and services. Due to the worldwide economic recession, it has suffered significant losses. To come out of slow GDP growth, creating jobs for the labour force coming into the market is a challenge. A huge investment is needed at this moment to cater to, but the investment is very low. The government is facing deficits in arranging the Annual Development Budget and revenue expenditure. But, its tax-to-GDP ratio remains very low compared to global standards. The world average tax-to-GDP ratio is around 14-15 per cent, while many developed countries collect above 25 per cent of GDP as tax revenue, and in Bangladesh, it is 7-8 per cent.
In Bangladesh, the urgent priority is not to increase the tax burden on existing taxpayers, but to expand the overall tax net by bringing more eligible citizens and businesses under taxation. A small group of compliant taxpayers currently bears a disproportionate share of the country's revenue burden, while a large number of financially capable individuals remain outside the formal tax system.
Bangladesh's tax-to-GDP ratio remains comparatively low in South Asia. Millions of people are economically active in sectors such as real estate, private medical practice, wholesale trade, online business, transport, contracting, and freelancing, yet many do not submit tax returns regularly. In a country of more than 170 million people, only a limited number file income tax returns, and an even smaller number pay significant taxes. This creates unfair pressure on salaried employees and compliant corporations who are already within the tax structure.
A practical example can be seen in urban commercial areas. A businessman may own multiple apartments, luxury vehicles, and profitable shops, yet remain outside the effective tax net because transactions are often cash-based and weakly documented. On the other hand, a salaried bank officer or corporate employee automatically pays tax through source deduction every month. This imbalance discourages compliance and weakens public confidence in the system.
Experts and the National Board of Revenue (NBR) suggest that a very large number of people in Bangladesh who likely have taxable income are still outside the effective tax net. A widely cited NBR estimate stated that around 1.16 crores of eligible taxpayers were outside the tax net.
Recent data also shows that around 10 million people have TINs, but about 7.2 million do not regularly file tax returns. In FY 2025-26, about 4 million returns were filed online, but more than 2.2 million declared zero taxable income. This means Bangladesh still has a major gap between people earning taxable income, people registered in the system, and people actually paying meaningful income tax.
For example, many individuals in the following groups may have taxable earnings but remain partially or fully outside the effective tax net:
? Real estate owners receiving rental income;
? Wholesale and retail traders;
? Private doctors and consultants;
? Contractors and suppliers;
? Transport business owners;
? Online entrepreneurs and freelancers;
? Land developers;
? Affluent rural businesses operate mainly in cash.
In contrast, salaried employees in banks, multinational companies, and government services are comparatively easier to tax because deductions happen automatically through payroll systems.
This is why economists often argue that the country should focus more on broadening the tax base rather than repeatedly increasing taxes on already compliant taxpayers.
If it can identify and include more taxable citizens through digital financial tracking, national ID integration, land registration linkage, bank transaction monitoring, and simplified online return systems, government revenue could rise substantially without increasing tax rates. Even adding a few million new taxpayers with moderate contributions would create a broader and fairer revenue base.
While arguing that a new taxpayer can be identified and brought into the tax net, it can be done in a simple way at a minimum cost. If NBR can take the initiative in an area-wise manner to identify taxable individuals, they can do so. Otherwise, a contractual investigator may be appointed on an incentive basis.
Just think of a case, huge people are attending various great events with extraordinary cars, suits, and tax investigators can witness those and issue a tax notice. Again, house owners can also be issued a tax notice and be given a hearing. It only required the will of the government and the integrity of the tax authority.
Countries like India and Turkey improved revenue collection significantly by digitizing tax administration, encouraging electronic payments, and widening taxpayer identification systems. We can also adopt similar measures while maintaining a taxpayer-friendly environment.
A broader tax net would provide the government with stronger resources for infrastructure, education, healthcare, agriculture, and social protection. Sustainable economic development depends not only on higher taxes, but on fair participation by all capable citizens in the national economy.

The writer is the DMD & CFO of DBBL
rafan3379@gmail.com