40 Tax administration and revenue reform

Chapter 40 of 60 in the Bangladesh 2036 research base. Contents of the series.

The 2025 split rebuilt the frame of the tax state; the ratio moves only if collection becomes binding on the base it already has

Bangladesh enters the decade with the weakest revenue machine in its peer group and, for the first time in the board's history, an administration rebuilt while it runs. In 2025 the interim government dissolved the National Board of Revenue as a unified board and replaced it with a Revenue Policy Division and a Revenue Management Division, both under the Finance Division and each headed by a secretary; the split month could not be confirmed from the sources this chapter draws on. This chapter deepens chapter 04, which carried the aggregate record of the tax ratio, one level down to the institutions and instruments of collection: what NBR actually collected against what its budgets promised, the composition by tax head, the exemption machine, the taxpayer-facing administration, and the reform sequence that would lift revenue to GDP toward the level the chapter 15 reform scenario assumes. The thesis is that the binding constraint is not policy design. Bangladesh has a modern income tax law, a VAT law and a tariff reform agenda on paper; what it does not have is an administration whose collection is binding on the large taxpayer base, and a political economy that lets the exemption instrument retire. The FY25 outturn tested the machine and returned 376,945 crore BDT of tax revenue against an original target of 495,000 crore BDT, an achievement rate of 76.2 percent [MoF iBAS 2026] [MoF Budget 2025]. A state that collects three quarters of what it promises cannot program expenditure, and its budget targets become fiction on arrival. One percentage point of GDP is worth roughly 62,446 crore BDT at the FY26 budget GDP [MoF Budget 2025, chapter arithmetic]; the distance between the FY25 actual tax ratio of 6.79 percent of GDP [MoF iBAS 2026] and the 10 percent the reform scenario in chapter 15 assumes is about three of those points, and this chapter is about the machinery that would have to change to collect them.

The FY25 outturn: 376,945 crore BDT collected against a 495,000 crore BDT promise

The outturn record used in this chapter now runs at budget basis, and it is worse than the World Bank aggregate chapter 04 carried. The iBAS++ actuals record total tax revenue of 369,776 crore BDT in FY24 and 376,945 crore BDT in FY25, nominal growth of 1.9 percent in a year the original budget had assumed 33.9 percent growth against the FY24 base [MoF Budget 2025] [MoF iBAS 2026]. Against the original FY25 tax target of 495,000 crore BDT, collection reached 76.2 percent; against the revised target of 478,000 crore BDT, 78.9 percent [MoF Budget 2025, chapter arithmetic on the two series]. Total revenue reached 436,054 crore BDT against an original 541,000 crore BDT, 80.6 percent [MoF iBAS 2026] [MoF Budget 2025, chapter arithmetic]. The actual FY24 tax ratio works out at 7.39 percent of GDP on the budget documents' own nominal GDP of 5,002,654 crore BDT, and the FY25 ratio at 6.79 percent of GDP as the iBAS++ ratio series records it, a fall of six tenths of a percentage point in the transition year [MoF Budget 2025, chapter arithmetic] [MoF iBAS 2026]. Both readings sit below the 7.64 percent of GDP the World Bank series carries for 2021, its latest observation [WB WDI 2026], which is chapter 04's headline number; the budget basis confirms the level and adds the direction.

The consequence ran through the expenditure side in the same documents. The FY25 revised budget cut the development programme from 265,000 crore BDT to 216,000 crore BDT, a reduction of 49,000 crore BDT or 18.5 percent in year [MoF Budget 2025, chapter arithmetic], while actual interest payments of 114,590 crore BDT in FY24 consumed 28.0 percent of the actual revenue of 409,812 crore BDT [MoF Budget 2025, chapter arithmetic on two tagged series]. A revenue shortfall of one tenth of the target forces a choice between the development programme, which is cut in year, and the interest bill, which cannot be cut at all. That arithmetic, not any speech, is the fiscal meaning of administrative failure, and it is why the banking system's government paper pile that chapter 06 measures is the residual claimant of every collection miss.

Three taxes, one workhorse: the composition record

The composition record shows a workhorse VAT, a direct tax that has grown into second place, and a border tax block that funds itself only while imports flow. The FY23 actual breakdown, carried in the Bangladesh Bank annual report from the FY24-25 Budget in Brief, puts NBR collection at 319,731 crore BDT, of which VAT contributed 126,225 crore BDT, taxes on income, profit and capital gains 107,145 crore BDT, supplementary duty 44,533 crore BDT, import duty 36,181 crore BDT, excise 4,066 crore BDT, export duty 3 crore BDT and other taxes 1,578 crore BDT, with non NBR tax at 7,994 crore BDT and non tax revenue at 38,934 crore BDT for a total of 366,659 crore BDT [BB AR 2024, Table 11.02, source: Budget in Brief 2024-25]. On those levels, VAT is 39.5 percent of NBR revenue, income and profit taxes 33.5 percent, supplementary duty 13.9 percent and import duty 11.3 percent [BB AR 2024, Table 11.02, chapter arithmetic]. The FY24 revised shares on the total tax base confirm the same shape, VAT at 36.85 percent of tax revenue and import duty at 10.23 percent [BB AR 2024, Chart 11.01].

Two structural readings follow. First, the border is a smaller revenue pillar than the debate suggests, but it is not small: customs duty plus supplementary duty, most of which is also collected at the border, is roughly a quarter of NBR revenue on the FY23 actuals [BB AR 2024, Table 11.02, chapter arithmetic], and the World Bank GFS series puts customs and other import duties at 11.7 percent of tax revenue in both 2017 and 2021 on its central government basis, a series whose methodology breaks in 2017 so its earlier readings are not comparable and are not quoted here as a trend [WB WDI 2026]. The tariff structure behind that flow is high and barely reformed: a most favoured nation simple average of 13.59 percent, a duty free share of only 4.65 percent of tariff lines, and a peak rate of 25 percent, all in the 2023 record [WB WITS 2023]. LDC graduation and the market access negotiations of chapter 02 put that structure under pressure in exactly the years the revenue reform needs to deliver, because every preference driven tariff cut removes border tax while leaving the domestic base where it was. Second, the direct tax share is high for a state with this few taxpayers on paper, which means the income tax is a tax on the formal salaried and corporate segment, withheld at source and audited lightly, while professional, trading and property income sits largely outside the net. NBR's taxpayer counts and return filer statistics are not held as series in the data lake and could not be confirmed; the NBR annual reports are the resolving source [NBR 2025].

Mechanism: an exemption economy, negotiated collection and a base that sits outside the net

The machine fails in three places, and each is documented in records available to this chapter.

The exemption machine is the first. The NBR online register of statutory regulatory orders held in this chapter's source archive, collected on 31 August 2026, lists 149 instruments: 59 in customs, 40 in income tax, 40 in VAT and 10 in excise, of which 15 are dated 2024, 32 are dated 2025 and 88 are dated 2026 up to 11 August [NBR 2026, register collected 31 August 2026, reflecting the NBR website list rather than the full universe of exemption instruments]. The register is a census of the favour economy chapter 04 described qualitatively: each instrument is a carve from the base, issued without a vote, and the flow accelerated in 2026 even as the reform rhetoric held. A single instrument shows the pattern: an SRO of 20 January 2025 cut the customs duty on air purifiers from 25 to 10 percent and waived the 3 percent regulatory duty and the 5 percent advance tax [NBR 2025, press note of 21 January 2025]. No published tax expenditure statement for the FY26 or FY27 budgets is held in this chapter's source archive, so the aggregate exemption stock those statements would target could not be confirmed; the budget documents' tax expenditure statements are the resolving source. What the register shows is the direction: an administration that adds carve outs faster than it retires them.

The administration is the second. The Enterprise Survey asks firms about their dealings with tax officials, and the record shows an interaction that has become less extortionate but remains discretionary. The share of firms expected to give gifts in meetings with tax officials fell from 54.4 percent in 2007 to 41.0 percent in 2013 and 19.3 percent in 2022 [WB ES 2007] [WB ES 2013] [WB ES 2022]. But 51.0 percent of firms were still visited by or required meetings with tax officials in 2022, 2.84 visits per affected firm [WB ES 2022], and the World Bank's final Doing Business round scored the paying taxes environment at 56.1 in 2020 [WB DB 2020]. The World Bank's Business Ready 2024-2025 assessment scores the taxation topic for Bangladesh at 48.0 overall, built from a regulatory framework pillar of 39.2, a public services pillar of 32.2 and an operational efficiency pillar of 72.7 [WB BREADY 2025, topic: Taxation]. The pattern in the pillars is the diagnosis: process digitisation has moved, discretion and service quality have not. The electronic fiscal device programme illustrates the gap between instrument and enforcement: NBR runs monthly lotteries on EFD receipts, with a first prize of 100,000 BDT in the October 2022 draw, to persuade consumers to demand machine printed invoices [NBR 2022, EFDMS lottery result of October 2022], an incentive wrapped around a device whose installed count could not be confirmed from the sources this chapter draws on.

The base is the third. The informal and threshold segments sit outside the net by design. The VAT registration threshold stands at an annual turnover of 30 lakh BDT with a turnover scheme up to 50 lakh BDT [NBR 2025, press note of 12 February 2025], and 36.5 percent of surveyed firms competed against unregistered firms in 2022, down from 46.6 percent in 2007 but still the norm in the surveyed market [WB ES 2022] [WB ES 2007]. Only 61.4 percent of firms in the 2022 survey were formally registered when they started operations, against 86.0 percent in 2013 [WB ES 2022] [WB ES 2013], a decline in starting formality that chapter 22 carries into the SME record. The FY25 collapse itself had a mechanism of this kind: the import compression that chapter 03 documents cut the border taxes that supply a quarter of NBR revenue, and the political disruption of the transition froze audit and assessment activity at exactly the moment enforcement mattered. The counter movement is real: new VAT registrations grew 26 percent in the six months from August 2024 to January 2025 against the same period a year earlier, after a August 2024 monthly registration count of 4,228 against 5,644 in August 2023 [NBR 2025, press note of 12 February 2025]. Widening the net is the one lever the post transition administration pulled early.

The decade ahead: a reform sequence in three layers, FY26 to FY36

The targets are already printed, and they are not modest. The FY26 budget set NBR tax revenue at 499,000 crore BDT, total tax at 518,000 crore BDT and total revenue at 564,000 crore BDT on a nominal GDP of 6,244,578 crore BDT, a tax ratio target of 8.30 percent of GDP [MoF Budget 2025, chapter arithmetic on the tagged series]. The FY27 budget targets total tax revenue of 629,000 crore BDT and total revenue of 695,000 crore BDT on nominal GDP of 6,830,024 crore BDT, a tax ratio target of 9.21 percent and a revenue ratio of 10.18 percent [MoF Budget 2026, chapter arithmetic on the tagged series]. The FY27 tax target exceeds the FY26 target by 21.4 percent nominal; the growth the FY25 outturn delivered was 1.9 percent [MoF Budget 2026, chapter arithmetic] [MoF iBAS 2026, chapter arithmetic]. The older medium term framework published with the FY25 budget projected total revenue at 10.0 percent of GDP, tax revenue at 9.3 percent and NBR tax at 9.0 percent by FY27, the final projection year the table carries [BB AR 2024, appendix Table III], a path whose FY25 waypoint the outturn had already missed when it printed. The IMF programme reviews carry revenue floors as quantitative anchors of the arrangement; the floor levels by review could not be confirmed from the sources this chapter draws on, and the review documents are the resolving source [IMF Art IV 2025].

The reform sequence this chapter's reading supports has three layers, and the calendar matters more than the labels. The first layer, FY26 to FY28, targets administrative binding: make the e-return channel and the online payment rails chapter 04 recorded the default for the large taxpayer base, complete EFD coverage of the VAT chain above the threshold, and wire third party data matching, bank charges, mobile financial services flows from chapter 37, withholding statements and import documents, into automated risk scoring so that audit selection stops being a relationship. The first year of evidence is in the iBAS++ quarterly record: the first quarter of FY26, July to September 2025, produced tax revenue of 92,166 crore BDT against the 518,000 crore BDT annual target, 17.8 percent of the year in 25 percent of the time [MoF iBAS 2026, chapter arithmetic]. Either the collection curve bends in FY26 or the FY27 targets are dead on arrival, and the monthly iBAS++ prints are the indicator that settles it early.

The second layer, FY27 to FY30, targets base repair: an exemption ceiling legislated with a sunset on new SROs, the tax expenditure statement published and capped, and the tariff schedule simplified in step with the post graduation market access settlement that chapter 02 negotiates, with each border duty cut compensated by a domestic VAT broadening in the same finance act. The FY27 budget's 9.21 percent tax ratio target cannot be met by rate increases alone; the arithmetic only closes if the base stops leaking, which is what the SRO register, 88 instruments dated 2026 to 11 August [NBR 2026], measures in real time. The third layer, FY30 to FY36, targets the base the state has never touched: property and land transaction taxes linked to the digitised records chapter 51 follows, capital gains on listed and unlisted assets matched to the transaction rails, and personal income tax widened as formalisation moves the informal segment chapter 22 measures. The reform scenario in chapter 15 assumes a tax ratio near 10 percent of GDP by around FY31; this chapter's machinery reading is that the first layer delivers at most a point of that, the second layer is what makes the FY27 budget's own target honest, and the third layer is the only one that reaches the 10 percent the scenario assumes on a durable basis.

Risks and upside: the target fiction, the tariff cliff and the reversal risk against the audit trail, the act and the graduation forcing function

Risks. First, the target fiction: a budget built on revenue that administration cannot deliver does not merely miss, it substitutes bank borrowing for the shortfall, and the crowding out chapter 06 measures deepens; the revealing indicator is the iBAS++ monthly collection against pro rata target, where the first quarter FY26 print of 17.8 percent of the annual target [MoF iBAS 2026, chapter arithmetic] already signals a second consecutive miss. Second, the tariff cliff without compensation: the post graduation trade settlement chapter 02 works on could cut border duties faster than domestic VAT broadens, and with import duty plus supplementary duty near a quarter of NBR revenue on the FY23 actuals [BB AR 2024, Table 11.02, chapter arithmetic], the revenue ratio falls even as the tariff regime modernises; the revealing indicators are the MFN average in the WITS record, 13.59 percent in 2023 [WB WITS 2023], and the VAT share of NBR collection. Third, the reversal risk: the gift rate in tax meetings could rebound and the SRO flow could accelerate if the post election settlement reverts to the favour economy, and the revealing indicators are the next Enterprise Survey gift rate, 19.3 percent in 2022 [WB ES 2022], and the annual SRO count on the NBR register.

Upside. First, the audit trail: the payments digitisation chapter 37 documents has created a transaction record of the formal economy that is third party data by construction, and wiring it to risk based audit is the cheapest enforcement gain available to any revenue administration in the region; the revealing indicator is the share of assessments opened from data matches, a statistic the Revenue Management Division should publish, currently not established. Second, the law: the Income Tax Act 2023 replaced the 1984 ordinance with a universal filing expectation and a self assessment discipline, and NBR's own clarification records that any taxpayer may file at any time with tax day fixed at 30 November [NBR 2023, clarification of 13 August 2023]; a filing universal expectation converts the entire economy into a declarable base, and the revealing indicator is the return count the NBR annual reports publish, which could not be confirmed from the sources this chapter draws on. Third, the graduation forcing function: the tariff cuts that graduation compels are also the moment to close the exemptions that protect uncompetitive producers, because the affected industries are already in adjustment, and the revealing indicator is a tariff schedule with fewer rates and a shrinking duty free exemption list against the 4.65 percent duty free share of 2023 [WB WITS 2023].

What to watch: five indicators whose thresholds mark the revenue regime

1. Tax revenue to GDP, budget basis. Current value 6.79 percent of GDP in FY25 [MoF iBAS 2026]. Threshold: two consecutive fiscal years above 8 percent, the level the FY26 budget targets [MoF Budget 2025], confirms the reform regime; a third year below 7 percent confirms the stall scenario of chapter 15.
2. NBR outturn against target. Current value 76.2 percent of the original FY25 tax target [MoF Budget 2025] [MoF iBAS 2026, chapter arithmetic]. Threshold: two consecutive years above 95 percent achievement marks an administration the budget can be programmed against; a fresh print below 80 percent marks the FY27 targets as notional.
3. The SRO flow. Current value 88 instruments dated 2026 to 11 August on the NBR register, against 32 in 2025 and 15 in 2024 [NBR 2026]. Threshold: a calendar year below 20 new or amended instruments signals the exemption regime change; a higher count in the first elected budget year signals the favour economy's return.
4. New VAT registrations. Current value 26 percent growth in the six months to January 2025 against the prior year [NBR 2025, press note of 12 February 2025]. Threshold: growth sustained above 10 percent through FY27, the horizon the current reform programme targets, means the net is widening structurally; a relapse to the August 2024 monthly level of 4,228 registrations means the drive was administrative theatre.
5. The B-READY taxation score. Current value 48.0 overall, against 59.2 for Vietnam, 56.7 for Indonesia and 50.1 for Pakistan [WB BREADY 2025, topic: Taxation]. Threshold: a score above 56 in the next assessment round would put Bangladesh at the level of the Vietnamese administration it competes with for investment; a score below 45 would mean the split administration has degraded service quality further.

Sources used

[MoF iBAS 2026] Finance Division iBAS++ actuals via bdpolicy.db, series: mof_actual_revenue_total, mof_actual_tax_revenue, mof_tax_gdp_ratio_actual, mof_revenue_gdp_ratio_actual, FY25 actuals at 30 June 2025 and first quarter FY26 at 30 September 2025, ratios on the 2015-16 base. [MoF Budget 2025] Ministry of Finance, Budget at a Glance, FY2025-26 budget documents via the lake budget_glance_history parquet, fiscal years 2023-24 actual, 2024-25 original and revised, 2025-26 original. [MoF Budget 2026] Ministry of Finance, Budget in Brief FY2026-27 via the lake budget_macro and budget_revenue parquets, revenue, tax, expenditure, ADP, deficit and nominal GDP targets for 2026-27. [BB AR 2024] Bangladesh Bank Annual Report 2023-24, Table 11.02 Composition of Revenue Receipts and Chart 11.01 Composition of Tax Revenue Receipts FY24 revised, sourced there to Budget in Brief 2024-25, Ministry of Finance, via ocr_text/bb/annual_report. [NBR 2026] National Board of Revenue online SRO register via the lake nbr_sros parquet, 149 instruments collected 31 August 2026, series: nbr_sros. [NBR 2025] National Board of Revenue press notes and publications: press note of 12 February 2025 on VAT registration growth and thresholds, press note of 21 January 2025 on the air purifier SRO, resolving source for taxpayer and filer counts. [NBR 2023] National Board of Revenue clarification of 13 August 2023 on return filing under the Income Tax Act 2023. [NBR 2022] National Board of Revenue, EFDMS lottery result of October 2022, electronic fiscal device receipt lottery programme, via ocr_text/nbr. [WB WDI 2026] World Bank World Development Indicators via the indicators snapshot updated 2026-09-04, series: GC.TAX.TOTL.GD.ZS, GC.TAX.IMPT.ZS, central government basis, calendar years. [WB WITS 2023] World Bank World Integrated Trade Solution applied and MFN tariff statistics via TradeWeave, series: bd_tariff_mfn_simple_avg, bd_tariff_duty_free_share, bd_tariff_peak_rate, 2023. [WB BREADY 2025] World Bank Business Ready 2024-2025, taxation topic scores via the indicators wb_b_ready_2025_topic_scores parquet, Bangladesh, Vietnam, Indonesia, Pakistan. [WB ES 2022] World Bank Enterprise Surveys Bangladesh 2022 wave, series: IC.TAX.GIFT.ZS, IC.FRM.METG.ZS, IC.TAX.METG, IC.FRM.CMPU.ZS, IC.FRM.FREG.ZS. [WB ES 2013] World Bank Enterprise Surveys Bangladesh 2013 wave, series: IC.TAX.GIFT.ZS, IC.FRM.CMPU.ZS, IC.FRM.FREG.ZS. [WB ES 2007] World Bank Enterprise Surveys Bangladesh 2007 wave, series: IC.TAX.GIFT.ZS, IC.FRM.CMPU.ZS. [WB DB 2020] World Bank Doing Business, paying taxes component score for Bangladesh, final 2020 round, via bdpolicy.db. [IMF Art IV 2025] IMF Article IV and ECF/EFF programme reviews for Bangladesh, revenue floors as programme anchors, resolving source for review level quantitative targets.

---

Verified line by line against primary sources: 124 claims checked, 6 corrected.

Previous: 39 Microfinance and NGOs

Next: 41 State-owned enterprises and subsidies

All sixty chapters and the ten narrative chapters.