The electronic return submission portal for individual taxpayers opened last month for the 2026-27 tax year, and the National Board of Revenue has sweetened the deal with a small incentive. Anyone filing between July 1 and September 30 will receive a rebate of 5.0 per cent on payable tax, subject to a maximum of Tk 25,000. It is fair to say that encouraging taxpayers to file before the last minute builds a healthy administrative culture. That part deserves no quarrel. But this welcome administrative improvement cannot hide the much larger problems confronting tax collection, which are likely to become increasingly apparent in the months ahead.
Revenue picture emerged from the just ended 2025-26 fiscal year offers an early preview of what is to come. The National Board of Revenue closed the year with a shortfall of Tk 875 billion, having gathered Tk 4.15 trillion against a target of Tk 5.03 trillion. One might expect such a wide miss to prompt a recalibration of expectations. Instead, the bar has been set even higher. For 2026-27, the revenue board has been assigned a monumental target of Tk 6.04 trillion that demands growth of more than 45 per cent over what was actually collected the year before. No such jump exists anywhere in the history of revenue administration in this country, neither during periods of strong economic expansion, nor under any government of any political colour. The target, in other words, has no foundation in lived experience. It rests on the assumption that the very apparatus which missed its mark by Tk 875 billion will somehow deliver an extra 45 per cent within 12 months, and it asks the wider economy to behave as though that assumption were reasonable. It is clearly not.
To reach anywhere near that target, the government cannot simply collect more from the people already paying tax. The net itself must widen and every gap through which money leaks must be sealed. But here is where the Finance Bill 2026 does something deeply counterproductive. Rather than widening the net, it dismantles the very mechanisms that made collection possible in this overwhelmingly informal, cash-driven economy. Minimum tax and final tax liability provisions were blunt instruments, no doubt, and businesses had legitimate grievances about them. But those provisions existed as practical safeguards against underreporting precisely because the tax administration lacked the capacity to verify actual incomes. Removing them without replacing with anything equally effective is a serious miscalculation. It is akin to taking away the crutches from a patient before the leg has healed.
Consider what happens with savings certificate interest. Under the old regime, tax deducted at source on that interest was final. Now that income falls into regular taxable earnings, and since the first Tk 350,000 of income carries zero tax liability, millions of small savers will discover that the tax already cut from their interest is refundable. The government will hand back money it had already collected, and it will do so on a massive scale because savings certificates attract an enormous pool of risk-averse investors. A provision that could very well have been retained as a minimum tax to extract extra revenue from wealthy investors has instead been turned into a refund factory. The same logic applies to contractors and subcontractors engaged in public works. For years, many of them reported income in a way that matched the tax amount already deducted at source by government agencies. With the minimum tax floor gone, a significant number of them will simply report lower profits or outright losses and claim back what was already withheld. This will create an even larger hole in revenue.
Meanwhile, the decision to raise turnover tax from 0.6 per cent to 1.0 per cent is creating its own set of problems at the ground level. On paper, taking one taka out of every hundred in sales sounds trivial. In practice, this tax applies to gross turnover regardless of whether the business made a profit or suffered a loss. A trader with annual sales of Tk 5.0 million and a modest profit margin may ultimately earn very little after meeting rent, salaries, electricity bills and other operating expenses. In a highly competitive market, profit margins are notoriously thin. The net profit might even be negative as well. Under the new turnover tax rate, however, business would have to pay Tk 50,000 simply because sales took place. For a shop running at a loss, that payment must come out of capital or by selling assets. That is not taxation of income. That is a levy on the act of doing business, and it treats a struggling trader the same way it treats a profitable one.
While intended to increase collections, this has produced two predictable responses in the market, neither of which helps the exchequer. The first is genuine panic among traders of all sizes. Business owners see the turnover tax as punitive, especially in competitive markets where margins are thin and volumes are high. The second response is more damaging. Faced with an automatic turnover tax calculation under the online return system, many traders are simply changing how they report their income. Instead of declaring business earnings, they are showing income from other sources or understating their sales. These taxpayers think that it is better to understate now and take the chance that the file never gets audited or reopened. Indeed, only a tiny fraction of returns ever face scrutiny. Policymakers should have anticipated that a tax policy while making accurate reporting feel dangerous will not create a culture of compliance.
The turnover tax hike has also pushed business away from the banking system. Since credits in bank accounts can be traced and treated as turnover, the incentive to deal in cash has grown stronger. One arm of policy is trying to formalise the economy while another is giving traders every reason to stay informal. This contradiction would be amusing if it were not so costly.
Revenue targets cannot be met simply by raising tax rates and expecting automatic compliance. Nor can they be achieved by discarding instruments that have already proven effective for tax collection. If anything, such changes are more likely to make the revenue collection harder than easier.
