Bangladesh Moves to Simplify Tax System

At a glance

• Finance Minister Amir Khosru Mahmud Chowdhury told Parliament that the government is working to simplify the tax system and make administration more transparent, as the fear of audits, harassment, and complicated procedures discourages many people from entering the tax net.
• The National Board of Revenue (NBR) is being reorganised to separate tax policy-making from tax administration and implementation, as the government believes that separating these functions could reduce opportunities for corruption and undue influence.
• According to the finance minister, Bangladesh’s tax-to-GDP ratio remains very low, so the goal is to make paying taxes easier to encourage more people to comply voluntarily rather than avoid the system.
• The government’s broader reform plans include greater digitalisation, such as electronic tax returns and payments, integrated taxpayer information, risk-based audits, and e-invoicing for VAT.
• However, the IMF’s latest assessment found that Bangladesh still has weaknesses in taxpayer registration, risk management, audit efficiency, VAT refunds and overall transparency, showing that major administrative problems remain.

Context

Despite having one of the lowest tax-to-GDP ratios globally, Bangladesh's stagnation at around 7-8%, Bangladesh's attempts at tax system reconstruction have been marked by a cycle of ambitious announcements followed by systemic implementation failures. As early as 2007, an IMF assessment revealed that initial administrative reforms yielded only modest improvements because they ignored deeper structural flaws, such as widespread exemptions and a narrow tax base. In a more recent attempt to modernize, the previous administration adopted a tax compliance improvement plan in 2024 and launched a 10-year Medium- and Long-Term Revenue Strategy in 2025 aimed at fully automating the National Board of Revenue.

Why It Matters

These reforms matter because taxpayers are more likely to comply when the system is predictable and does not depend heavily on individual officials. The new approach will therefore be tied to measurable targets: completing automation, reducing unnecessary face-to-face interactions, making audits genuinely risk-based, closing loopholes for large-scale evasion, and regularly publishing progress.

What We Think

Previous attempts show that Bangladesh does not necessarily lack reform ideas; it struggles to carry them through. The government’s decision to separate tax policy from tax administration addresses one of the structural weaknesses that have repeatedly undermined reform. But structural separation alone may not fix Bangladesh’s revenue problem. The government should treat structural separation as the beginning of tax reform, not its solution.