Revenue harnessing at risk as NBR officials find legal flaws

Splitting tax authority under the newly framed ordinance may put tax-revenue mobilisation in jeopardy as revenue officials say they have found numerous major flaws in the draft law.

Even the proposed ordinance is not aligned with the National Board of Revenue (NBR) advisory committee for reform that the interim government formed to recommend separation.

Income tax, customs and VAT officials have said they welcome the bifurcation of the NBR into policy and implementation bodies, but dissolving the NBR and allowing other cadres in revenue policy and management disappointed them.

Talking to the FE, a number of tax, VAT and customs officials demanded immediate amendments to the ordinance.

The ordinance, tilted 'State Policy and Revenue Management Ordinance 2025', was approved by the advisory council of the interim government early this month. It is set to be published as gazette after vetting by the law ministry.

Under the ordinance, the National Board of Revenue and the Internal Resources Division (IRD) will be dissolved and replaced by two divisions--Revenue Policy Division and Revenue Management Division-under the Ministry of Finance (MoF).

In an emergency Extraordinary General Meeting on Sunday, the customs and VAT cadres issued a statement demanding presence of technically sound revenue personnel they termed the key to revenue mobilization.

Earlier, BCS Taxation, Customs and VAT Association on April 13 also issued a statement airing their concern.

The ordinance has a provision to allow other cadre officials, including administration cadres, which revenue officials found as part of a "hidden conspiracy" against their two cadres.

The chief of the revenue policy department would be secretary or senior secretary.

In recruitment of the head of two divisions, the ordinance has kept the scope for 'eligible government officials' while "such technical revenue-mobilization task must solely be kept under revenue cadres", says a senior revenue board official, preferring anonymity.

The ordinance says the 'revenue cadre' officials would be prioritized to be head of the revenue-management division, but such open-ended provisions create scope for other cadre officials to be in such position, the official says.

"A specific provision must be kept in the ordinance on revenue cadre official who would be only responsible for policy formulation and revenue management," he adds.

It's global practice to appoint specilised revenue personnel in the tax policy and management, while the ordinance has kept it open, he points out.

"Such instability in revenue administration might affect enhancement of tax-to-GDP ratio," he says.

Separation of the NBR is a long-advocated condition of development partners on disbursement of budget-support credits.

Earlier, the five-member advisory committee placed its report with a formation on separation.

Finance Adviser of the interim government Dr Salehuddin Ahmed also recently spoke on the ordinance's mismatch with the advisory committee's proposals.

The draft ordinance section 4 (4) allows other cadre officials of economics, business administration, research, statistics, administration, audit, and law to frame revenue policy and management.

In India, IRS is solely equipped with specialised revenue officials as any policy formulation and management needs yearlong expertise on such technical field, officials said.

As per the ordinance, the Revenue Policy Division will be responsible for designing the country's tax-policy framework, proposing tax laws, setting rates, and ensuring coordination on international tax treaties and trade-related levies.

The Revenue Management Division will handle tax administration, compliance, audit, and enforcement across income tax, VAT, and customs.

Dr Masrur Reaz, Chairman of Policy Exchange Bangladesh, says it is heartening to see that the interim government is taking the legislative measures for separation of tax-policy and tax- administration functions, which is expected to ensure fair and effective revenue regime.

"While the legal reforms are critical first steps, the success of this virtuous separation will hinge on the technical capabilities of these departments since both the new units will deal with highly specialised issues in direct and indirect taxation.

"Ensuring that the leadership and executives of the revenue policy and revenue management units have adequate technical understanding and experience will be critical success factors for this important reform," he says.

Chartered Accountant Snehasis Barua says a clear segregation between taxation policy and taxation administration processes is undoubtedly a commendable initiative. However, its success will depend on capable and experienced leadership, a stable and efficient workforce, a strong research framework, an effective information-exchange system, and a participatory policymaking process.

"If these aspects are properly established can this structural reform be transformed into a sustainable and effective model. Policy independence becomes meaningful only when it progresses in harmony with reality," he notes.

Policy formulation should align with the country's overall economic and development plans, not just target-based revenue. Otherwise, it will merely remain an administrative reshuffle, the benefits of which will ultimately not reach the people.

"Therefore, the interim government's primary responsibility now is to demonstrate accountability, transparency, and foresight at every stage, from the wording of the ordinance to its implementation," he suggests.

"Otherwise, this noble initiative, instead of achieving policy independence, will only create an invisible wall-one that divides its own administration but does not bring about development."

Aminur Rahman, member of the advisory committee on NBR, says the ordinance has not followed the report submitted by the five-member committee to make the NBR functional after separation.

"The ordinance has bypassed the revenue-reform issues with some provisions to downgrade NBR members," he adds.

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