Published :
Updated :
For all latest news, follow The Financial Express Google News channel.
Speakers at a roundtable on Monday emphasised the need for integrated and holistic reforms at the National Board of Revenue (NBR), with a particular focus on digitisation, consistency in tax rates, and enhancing direct taxation.
They also stressed the importance of separating policy formulation from tax collection to create a more business-friendly environment.
The experts highlighted that while Bangladesh's nominal tax rates may seem low, the effective tax burden is disproportionately high, often reaching up to 45 per cent and, in some instances, exceeding 80 per cent.
They came up with the observations and recommendations at the roundtable, hosted by the Institute of Chartered Accountants of Bangladesh (ICAB) and the Economic Reporters' Forum (ERF), at the ICAB office in the capital.
Speaking as the chief discussant, Muhammad Abdul Mazid, a member of the NBR advisory committee for reforms and a former NBR chairman, said the reform committee would soon submit its report, though the government has not given a deadline.
Mentioning that an interim report has already been submitted, he also said the committee would submit separate reports on the separation of policy and tax collection; holistic digitisation; and VAT, tax, and customs laws.
He said NBR should be empowered and separated, and the 1972 NBR order needs to be significantly overhauled for that.
Mazid further said the recent VAT and supplementary duty hikes should have been explained and discussed beforehand.
Former NBR chairman and a member of the advisory committee for reforms Dr Nasiruddin Ahmed said the committee would focus on direct taxation, observing that indirect tax increases inequality.
He also said consistency in taxation is very important as investment comes on the basis of that.
In her welcome address, ICAB President Maria Howlader highlighted the importance of NBR reforms to enhance the efficiency and effectiveness of tax collection in Bangladesh.
She said reforms should address issues like tax evasion and simplifying return filing.
By doing so, she said the government can significantly boost revenue collection, providing additional resources for healthcare, education, and infrastructure.
"A streamlined and transparent tax system can also attract greater business investments, fuelling economic growth and job creation. Equally crucial is establishing a more equitable tax structure that ensures all taxpayers contribute their fair share, thereby reducing the burden on low-income individuals," Howlader explained.
She said previous reform efforts, such as those in 2008, were abandoned, a mistake that must not be repeated.
Farid Ahmed, a former NBR member and a member of the advisory committee for reforms, highlighted that small and medium enterprises (SMEs) bear the highest effective VAT burden due to the existing revenue system structure.
"Although VAT is nominally set at 15 per cent, SMEs end up paying 17 to 20 per cent in reality," he explained.
He further said this additional burden stems from structural inefficiencies in the revenue system. "Yet, no SME-related organisation has submitted proposals for NBR reforms."
Aminul Islam, a former NBR official and a member of the advisory committee for reforms, noted that the tax burden disproportionately falls on compliant taxpayers, while those who evade taxes are often overlooked.
This approach essentially enables revenue evasion, he said.
To address this imbalance and boost revenue collection, he stressed the importance of targeting the underground economy and curbing money laundering, which siphons off significant resources that could otherwise contribute to the national exchequer.
Bangladesh Trade and Tariff Commission Chairman and a former member of the NBR's VAT wing Dr Moinul Khan highlighted examples where lowering tax rates led to a significant increase in revenue.
"In the past, when the tax rate for hotels and restaurants was reduced to 5.0 per cent, revenue collection rose by 40 per cent. Similarly, setting the VAT rate for sweet shops at 7.5 per cent resulted in higher collections," he said, stressing the importance of fostering self-compliance rather than resorting to frequent tax rate hikes.
"Revenue does not always grow with rate increases; it can improve through reductions as well," Khan added.
Masrur Reaz, chairman of Policy Exchange Bangladesh, pointed out inefficiencies in public expenditures as a significant factor.
"Many unnecessary projects with inflated budgets have been undertaken in recent years. Projects worth Tk 5 have been allocated Tk 25, putting undue pressure on the revenue board to generate additional funds. Until such pressure on the NBR is reduced, sudden tax hikes will continue," he said.
He said reforms in the revenue department should come with necessary reforms in expenditures as well.
Senior Research Fellow of the Centre for Policy Dialogue (CPD) Towfiqul Islam Khan questioned the failure to implement the electronic fiscal device (EFD) system, asking who is responsible and what measures have been taken to address the lapse.
He also highlighted the need for accountability across all levels, noting that even chartered accountants must take responsibility for errors in audits.
Khan acknowledged that taxes are not properly collected in Bangladesh due to widespread evasion, facilitated by a culture of bribery.
He argued that even reducing tax or VAT rates, such as lowering the VAT rate from 15 per cent to 10 per cent, would not ensure compliance, as many businesses would still evade taxes.
The CPD senior research fellow stressed the importance of creating a transparent system where accountability is enforced and citizens understand their responsibilities.
He also pointed out that corporate tax filing has yet to be modernised, suggesting that integration with the document verification system (DVS) could be a solution.
Administrator of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Md Hafizur Rahman said the country's tax rates are high in comparison to its competitors.
ERF President Doulot Akter Mala said the NBR advisory committee for reforms should consult with ERF, ICAB, and other trade bodies.
She urged to find the reason why corporate tax collection did not increase after the introduction of DVS.
The ERF president also said NBR should regularly inform local and foreign investors of the details of tax rules to minimise complexities and cut underhand dealings.
Mala questioned whether the country's businesses are capable of paying 15 per cent VAT.
Among others, former ICAB presidents Humayun Kabir and Jamaluddin Ahmed, journalist Zakir Hossain, and Foreign Investors' Chamber of Commerce and Industry (FICCI) board member Mohammad Iqbal Chowdhury spoke, while ICAB Chief Executive Officer Shubhashish Bose moderated the discussion.