Govt aims to raise tax-GDP ratio to over 10pc by FY35

In an ambitious move, the government aims to raise the country's tax-to-GDP ratio to 10.5 per cent by the 2034-35 fiscal year, according to officials.

This will be achieved through the implementation of a Medium- and Long-Term Revenue Strategy (MLTRS) for FY26 to FY35, said the officials familiar with the plan on Tuesday.

The government has formally endorsed the MLTRS - a comprehensive reform blueprint designed to overhaul the taxation system, strengthen compliance, and boost revenue mobilisation.

The strategy is built around six core goals: end-to-end automation of the National Board of Revenue (NBR)'s business processes; raising the tax-to-GDP ratio; improving voluntary compliance; closing the gap between potential and actual revenue; ensuring uniform enforcement of laws; and strengthening integrity and transparency.

Currently, Bangladesh's tax-to-GDP ratio stands at 7.3 per cent - one of the lowest in South Asia.

Automation is central to the MLTRS, aiming to improve tax administration, ease access, and deliver better services to taxpayers. A cross-cutting project will integrate several ongoing initiatives, such as the Customs Modernisation Strategic Action Plan, Asycuda World, and online tax filing platforms. Given its complexity, the project is expected to extend into the long-term phase of the strategy.

According to the Ministry of Finance's Macro-Economic Policy Statement (2023-24 to 2025-26), Bangladesh achieves some of the highest returns on investment in taxation systems compared to other developing countries. The automation drive, therefore, presents a unique opportunity to significantly enhance the tax-to-GDP ratio.

Over the years, the NBR has introduced multiple automation and digitalisation initiatives, including the Tax Modernisation Plan (2011-16), Reforms in Revenue Administration (RIRA, 2008), Management of Information System of Taxation (MIST, 2008-09), Tax Administration Capacity and Taxpayer Services (TACTS), Comprehensive Modernisation Plan (CMP, 2011), Strengthening Governance Management Project (SGMP, 2011-18), VAT Improvement Programme (VIP, 2014-2024), Electronic Fiscal Device (EFD, launched in 2019), Bangladesh Integrated Tax Administration System (BITAX, 2016), and ASYCUDA modernisation (initially introduced in 2003).

These efforts will serve as a foundation for the MLTRS, though officials acknowledge that Bangladesh remains in the early stages of automation and some previous initiatives have yet to meet their objectives.

The NBR is targeting a minimum 10 per cent tax-to-GDP ratio by 2032, with significant efforts to meet the 10.5 per cent target by FY35. Unlike in previous plans, future Five-Year Plans (FYPs) will adopt benchmarks aligned with the MLTRS.

Improving voluntary compliance is another major goal. Current shortcomings in VAT, personal, and corporate income tax compliance undermine the credibility of the tax system and erode public trust. Factors contributing to low compliance include complex tax laws, traditional administration practices, low awareness, and weak trust in government systems.

To address this, the MLTRS suggests simplifying tax rules, enhancing taxpayer services, improving enforcement with consistent penalties, incentivising compliant taxpayers, and promoting a culture of compliance through education and outreach.

Revenue generation remains below potential, which partly explains overly optimistic targets in the Eighth Five-Year Plan (8FYP). Increasing direct tax yields, easing filing procedures, expanding digital platforms, and intensifying revenue collection efforts are seen as critical as customs duties continue to decline. The report also highlights an estimated USD 15-20 billion lost annually through money laundering, which, if addressed, could significantly expand the tax base.

The NBR emphasises that its mandate is rooted in the rule of law, with administrative practices requiring uniformity and fairness to build taxpayer confidence. Automation is viewed as a key enabler of standardised and transparent enforcement, though institutional reforms will remain essential to ensure equity and efficiency.

Strengthening integrity and transparency is equally critical. The NBR plans to enforce a Code of Ethics and Conduct and bolster internal mechanisms to investigate fraud, corruption, and other malpractices, fostering a culture of ethical behaviour and accountability.

Building trust and achieving the MLTRS goals will be a gradual process, but officials believe the strategy will lay the groundwork for a more resilient, transparent, and efficient tax administration system.