Throughout the interim government’s tenure, reforming the country’s revenue sector drew intense attention. The issue even spilled onto the streets, echoing through corridors of power, and igniting debates across bureaucracies. The “Revenue Policy and Revenue Management Ordinance 2025” was finally promulgated on May 12 and revised on September 1 last year. However, under the new BNP government, the fate of the revenue sector reforms has become uncertain as the parliament failed to ratify the ordinance within the constitutionally mandated 30-day period since its first sitting on March 12.
The ordinance aims to separate tax policymaking from tax administration to enhance efficiency, accountability, and revenue mobilisation by bifurcating the National Board of Revenue (NBR). This reform push evolved from Bangladesh’s persistently low tax-to-GDP ratio, which hovers below seven percent, one of the lowest in the world, even among South Asian peers. Multilateral lenders, including the International Monetary Fund and the World Bank, alongside businesses, economists, and policy analysts, have long advocated for such a structural separation.
The ordinance, however, drew criticism as the formulation procedure lacked proper consultation with stakeholders. At the onset, NBR staff staged an unprecedented demonstration across the country over restructuring the revenue administration and sharing top posts between revenue and admin cadres. Although the ordinance was later revised, it could not be implemented due to a bureaucratic wrangle and a writ petition filed by an admin cadre official.
Following its lapse in the parliament, the incumbent finance minister, Amir Khosru Mahmud Chowdhury, said that his government would complete the separation of revenue policy and administration after further review. He labelled the ordinance as half-baked, but did not clarify what a more judicious reform would entail. Last week, a nine-member panel was formed to re-examine the ordinance and its amendment.
Yet, a critical question remains: is there any immediate prospect of reviving meaningful revenue sector reforms under the new government?
Reform is crucial for an already strained revenue system with limited fiscal space. In fact, the failure or uncertainty of the NBR bifurcation may even accentuate the impact of external shocks. For instance, uncertainty has arisen about the final tranche of IMF’s $4.7 billion loan programme (later revised to $5.5 billion). There have been some media reports about IMF loan suspension due to uncertainty of major reforms, including the NBR bifurcation, but the government denied such claims.
While financial support from multilateral lenders remains uncertain at this point, Bangladesh’s low tax-to-GDP ratio continues to severely constrain the government’s ability to finance essential public services, from infrastructure and energy to health and education. As expenditure needs rise, driven by subsidies, debt servicing, and social protection, the gap between revenue and spending continues to widen.
On top of that, the ongoing US-Israel war on Iran has dealt a double blow to the country’s revenue sector. Bangladesh is already “out of pocket by nearly $2 billion” as soaring energy import costs force it to rely on volatile and expensive spot markets amid disrupted supply chains. Meanwhile, the revenue administration is facing a massive Tk 2.67 lakh crore shortfall in the current fiscal year. This has forced the government to rely more on bank borrowing, both domestically and externally. Increased domestic borrowing risks crowding out private sector credit, while external borrowing raises concerns about debt sustainability, especially in a volatile global environment.
Apart from addressing these financial issues, the separation stipulated in the ordinance is also important for ensuring efficiency and governance. The current structure of the NBR combines policy formulation and tax administration within a single entity, creating conflicts of interest and limiting accountability. Separating these functions could improve transparency, reduce discretion, and strengthen enforcement.
Also, Bangladesh’s tax system remains narrow and uneven, with a heavy reliance on indirect taxes such as VAT, which disproportionately affect lower- and middle-income groups. As per the reform recommendations, a modernised revenue framework could be formed to help broaden the tax base, improve compliance, and make the system more equitable.
Finally, the reform could pave the way for a more research-driven and participatory tax policy framework, replacing the current system, which is widely seen as inefficient and slow to respond to emerging economic needs. A stronger institutional setup would allow evidence-based policymaking, greater stakeholder consultation, and more adaptive tax measures aligned with changing domestic and global economic realities.
This is why the argument for separation matters. An autonomous tax authority would not magically raise revenue overnight, but it could begin to change incentives. In fact, delaying reform carries mounting economic costs. Without a stronger and more efficient revenue system, the government’s ability to sustain growth, manage fiscal pressures, and respond to external shocks will remain constrained.
As reforms hang in the balance, the implicit costs become higher for Bangladesh. Had the government started the reform programmes sooner, it would have strengthened revenue mobilisation. The government should, therefore, publish a credible reform roadmap to rebuild trust among multilateral lenders and local stakeholders, since uncertain reform may erode credibility.
The price of inaction is clear. The question is whether policymakers are willing to pay it.
Md Asaduz Zaman is a journalist at The Daily Star. He can be reached at [email protected].
Views expressed in this article are the author's own.
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