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The finance adviser has directed the formulation of a comprehensive tax- exemption policy that will vest the exclusive authority to approve tax exemptions or expenditures in parliament, according to Md Abdur Rahman Khan, chairman of the National Board of Revenue (NBR).
Once enacted into a law to strengthen domestic revenue mobilisation, the policy will strip both the government and the NBR of the power to grant such exemptions, he said while speaking as the chief guest at a seminar on Tuesday.
The seminar titled "Macroeconomic Perspective and Fiscal Measures" was jointly organised by the Economic Reporters' Forum (ERF) and the Foreign Investors' Chamber of Commerce and Industry (FICCI).
Dr M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, presented the keynote, while FICCI Executive Director TIM Nurul Kabir spoke at the event chaired by ERF President Doulot Akter Mala.
The NBR chairman said that the government was providing a huge amount of tax exemptions to increase employment, industrialisation, and investment from home and abroad.
Personal connections or persuasive lobbying could help secure huge tax exemptions, but that door is now being closed, he said.
Speakers at the event said the economy is grappling with multiple challenges stemming from data manipulation, the formulation of oversized national budgets without considering financing capacity, and the implementation of mega infrastructure projects reliant on foreign loans.
They urged the government to prepare a realistic and attainable national budget for the next fiscal year, setting aside the fascination with overly ambitious GDP growth targets.
The NBR Chairman provided insights into the upcoming national budget policy, tax structure, ongoing reforms in tax administration, and the outcomes of recent meetings with the International Monetary Fund (IMF) and the World Bank in Washington, DC.
The government has accepted most revenue reform suggestions from the IMF and World Bank, though some issues-especially with the IMF-are still under negotiation.
A key policy dispute over full exchange rate liberalization between the central bank and finance ministry remains unresolved, he said and added that a final decision expected at a meeting of the IMF on May 5.
Regarding the budget size, he said that, "If we increase our spending-especially through borrowing-it could put the state at risk. We must align our expenditures with our income to ensure we don't pass on a growing debt burden to future generations.
This approach will be reflected in the budget for the next financial year, he said adding that both Chief Advisor and Financial Advisor have emphasized that the budget should be as practical and grounded in reality as possible, avoiding overly ambitious projections.
To reduce the fiscal gap, the government will focus on cutting unnecessary expenditures while striving to boost revenue, he said.
Explaining the justification of tax exemption, NBR Chairman said that, significant tax exemptions have been provided across multiple sectors over an extended period to boost employment and attract both domestic and foreign investment.
"However, it is now time to rethink our approach. Our tax expenditures have become disproportionately high, while overall tax collection remains low. As a result, we are struggling to meet the country's growing needs-particularly in terms of operational costs and public investment," he said.
However, the tax rate in the county is lower compared to other neighboring and peer countries to remain competitive, he said adding, the individual tax rate in Bangladesh dropped to 30 per cent from previously 70 per cent.
He said that business leaders consistently call for a reduction in tax rates, which presents a significant challenge.
The NBR Chairman highlighted governance issues as a major concern, stating that responsibilities are not being fulfilled as they should.
He emphasized the need to address significant discrepancies and deviations, which are hindering progress. In the upcoming budget, tax-related adjustments will be introduced in certain areas.
The upcoming budget will include tax adjustments, with some areas easing and others tightening, along with alternative benefits to support businesses, he said.
Ensuring proper implementation of laws and regulations is also a priority, as stifling business operations will hinder tax collection and economic growth, he added.
Dr. M Mashrur Reaz stated at the event that the economy is facing significant challenges in debt management due to the implementation of large infrastructure projects funded by foreign loans over the past decade.
He highlighted that loans were taken based on an illusory debt-to-GDP ratio, without properly considering repayment capacity, particularly the debt-to-tax ratio or debt-to-foreign exchange earnings ratio.
Abul Kashem, General Secretary of the ERF moderated the event arrange at the ERF auditorium in the capital.
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