NBR’s FY'25 tax-to-GDP ratio falls

Bangladesh's tax (NBR part)-to-GDP ratio declined by 0.66 percentage point in the 2024-25 financial year, raising concern over waning domestic revenue in comparison with the nominal GDP.

The ratio fell to 6.56 per cent in FY25 from 7.2 per cent in FY 24, available data showed.

Economists, however, said the government's dependence on borrowing from external and internal sources might increase due to lower revenue mobilisation in the last fiscal.

Though tax-to-GDP ratio is usually calculated on revenue collection from both NBR and non-NBR segments, the FE report mentions the NBR tax-to-GDP ratio due to unavailability of data from non-NBR revenue. According to the provisional data, the National Board of Revenue (NBR) had collected Tk 3.70 trillion worth of revenue last fiscal, about 20 per cent down from the revised target of Tk 4.63 trillion.

The Tax-to-GDP ratio has been calculated on the basis of the country's nominal GDP amounting to Tk 56452 billion in FY 25 as per the data from the finance ministry.

In the last fiscal, the country's tax-GDP ratio was calculated at 7.22 per cent based on actual GDP of Tk 50027 billion and tax collection amounting to Tk 3.61 trillion.

Talking to the FE, NBR Chairman Abdur Rahman Khan, however, said it is not justified to calculate tax-to-GDP ratio on the basis of estimated GDP. "The tax-GDP ratio cannot be calculated correctly without the actual GDP size," he added.

"There is no scope to inflate the data in respect of tax collections though allegations are often made in this connection," the NBR chairman observed

Distinguished fellow of the Centre for Policy Dialogue (CPD) Professor Mustafizur Rahman said such 'discouraging' tax-collection performance is really a matter of concern for Bangladesh.

He also suggested immediate steps to accelerate the country's domestic revenue mobilisation through automation and reforms.

Enhancement of tax to GDP ratio is one of the major conditions, set under the International Monetary Fund's (IMF) budget support for Bangladesh.

According to revenue board officials, they are now worried about how the IMF would respond to the downtrend in the tax-GDP ratio and what steps it would take regarding the disbursement of its next trance of assistance.

They said the situation was completely different as the taxmen could not work for almost half of the fiscal year due to several factors, including a series of protests followed by the July-uprising.

A number of well-off people, linked to past regime, either fled the country or jailed, which created an adverse impact a blow the tax revenue collections, they added.

"If nominal GDP is 14 per cent (inflation 10 per cent and GDP 3.97 per cent), then how can the growth of nominal GDP be 2.23 per cent?" Professor Rahman questioned.

In the FY 25, the NBR collected Tk 1.0 trillion as import export taxes, Tk 1.41 trillion as VAT and Tk 1.29 trillion as income tax.

Its revenue collections fell short of the revised target by Tk 926.25 billion.

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