THE government has dissolved the National Board of Revenue with the Revenue Policy and Revenue Management Ordinance 2025, promulgated on May 13, to effect reforms in the revenue sector. The ordinance aimed at modernising tax administration and bolstering revenue collection has replaced the revenue board with two divisions, the Revenue Administration Division and the Revenue Policy Division, under the finance ministry. The policy division will design tax laws, set rates and oversee international tax treaties while the management division will handle enforcement, audits and compliance for income tax, value-added tax and customs. The restructuring has been done as the revenue board had consistently failed to meet the revenue collection target over 50 years and the country鈥檚 tax-to-gross domestic product ratio has remained about 7.4 per cent, one of the lowest in Asia. Amid widespread allegations of corruption in the revenue sector, the government鈥檚 reform initiative is promising if it delivers what it promises on paper.
The government says that the ordinance would address several long-standing issues, including the conflict of interests, inefficient revenue collection, weak governance, bureaucratic overlap, demoralisation and internal tensions. The revenue board officials have, however, staged protests, saying that the reforms are made without adequately taking into account their concern and suggestions. They are concerned that such reforms would undervalue the experienced and skilled work force. Some argue that the ordinance runs the risk of weakening accountability and essential technical expertise while encouraging politicisation by directly subordinating revenue administration under the finance ministry. The over-reliance on indirect, or regressive, tax that has for long been identified as the problem of the taxation system has, however, remained unaddressed. An over-reliance on indirect taxes such as the value-added tax adds to inequality in society as it disproportionately burdens the poor. Tax evasion by companies and corporate TIN holders is yet another concern. Bangladesh loses, as a report by the London-based Tax Justice Network says, more than $144 million in tax revenue each year, mainly because of corporate tax abuse and offshore tax evasion. The success of higher revenue mobilisation targets would, therefore, require curbing corruption and聽 introducing direct, or progressive, taxes, which would increase revenue collection and act as a powerful tool to combat economic inequality.
The government鈥檚 move to restructure the revenue sector is a welcome move considering years of failures in raising the tax-to-GDP ratio. The government should, however, respond to the concern that annexeing the taxation structure under the finance ministry could risk politicisation. More important, the government needs to abandon its over-reliance on regressive tax and make a policy shift towards a progressive tax system, where the average tax burden increases with income.
