Government's revenue plans to eliminate the provision of legalization of undisclosed money in the national budget for the next fiscal year, as it has long been criticized as washing 'black money white'.
National Board of Revenue (NBR) chairman Abdur Rahman Khan disclosed the plan Saturday at a media meet on the looks of the budget in the making after a regime change.
However, he said if full abolition is not feasible, the penalty rate on undeclared money, particularly in the housing sector, would be increased to a level that ensures a higher tax burden than that of regular taxpayers.
The NBR chairman made the remarks at a seminar titled "Domestic Revenue Mobilization" jointly arranged by the Economic Reporters' Forum (ERF) and the Research and Policy Integration for Development (RAPID) at the ERF auditorium in the capital.
He also said at the event that a "highly aggressive tax structure" has been introduced over the decades to align with ambitious national budgets, yet weaknesses in implementation persist.
He mentions that many businesspeople argue that tax rates across various sectors are excessively high, with claims that this is also deterring foreign investment. "The NBR will try to liberalize tax policy in future with increased effort on implementation to boost revenue mobilisation," he told the meet.
However, tax exemptions would be reduced in the future, he said, adding that the NBR will not grant exemptions to any new sectors, and that necessary exemptions will be provided with a clear termination timeline.
In response to a question from the reporters, the NBR Chairman said that recently, some facilities for investing undisclosed money had been canceled. One such facility will end next June under the sunset clause. "We aim to bring the tax rate closer to the standard rate," he added.
Currently, individuals can legalize undisclosed money by paying tax at the regular rate, along with a 10-percent penalty on that tax.
Professor Dr M Abu Eusuf, Executive Director of RAPID, presented the keynote titled "Domestic Revenue Mobilisation for Inclusive Growth and Development: Policy Reform Priorities for Bangladesh," at the event chaired by ERF president Doulot Akter Mala.
The keynote highlights that despite economic growth, Bangladesh faces revenue-mobilisation challenges due to a low tax-to-GDP ratio, limiting investment in key sectors and exposing structural weaknesses in tax collection and compliance.
"Bangladesh's heavy reliance on indirect taxes, like VAT and trade-based taxes, disproportionately burdens low-income populations, while weak direct tax collection is further hindered by low taxpayer registration, tax evasion, and numerous exemptions," said Mr Abu Eusuf.
He mentions that the current public expenditure in Bangladesh is about 13.5 per cent of GDP, lower than in countries like India, Nepal and Vietnam.
Despite this, the economy faces a 5.0 per cent of GDP as budget deficit, mostly financed through borrowing, resulting in interest payments exceeding 14 per cent of the budget.
"Tax exemptions in Bangladesh have reached over 6% of GDP, and while some exemptions may be justified for specific sectors, reducing them is crucial to expanding the government's fiscal space," he said.
The economist also recommends empowering the revenue administration through additional human resources, introducing technologies, automation and integrating among several agencies of the government to boost revenue receipts.
The NBR chairman said at the event that the government failed historically to allocate resources enough to meet the demands for priority sectors like health, education and human resources due to lower revenue mobilisation.
"Revenue mobilisation in the European countries varies around 40 per cent of the GDP, while it is only 7 per cent in Bangladesh," he said and explained that such revenue is not enough for appropriate allocation for health and education.
He remarked that the NBR has no role in this matter, stating, "The NBR is assigned a revenue-collection target, with predetermined budget size and deficit.
"Such target, set without regard to reality, is never met," he said and added that the budget deficit, public debt, and interest payments continue to rise in response to the ambitious budget over the last 52 years.
He notes that 9.9 million out of 11.4 million Taxpayer Identification Number (TIN)-holders do not submit tax returns, and emphasized that these potential taxpayers will be gradually brought onto the tax net by way of making filing returns mandatory. He mentions that notices are being sent to those failing to submit returns.
Additionally, he stated that potential taxpayers would be identified in districts, upazilas and rural growth centers without burdening existing taxpayers.
He focused on automation, which will significantly reduce taxpayers' fears, and revealed plans to eventually eliminate offline return submissions.
Shawkat Hossain Masum, head of online at the Daily Prothom Alo, spoke at the event moderated by Abul Kashem, General Secretary of the ERF.
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