The interim government has split the National Board of Revenue into two new divisions under the finance ministry with the aim of improving efficiency of revenue administration, reducing conflict of interests and widening the country鈥檚 tax base, said the chief adviser鈥檚 press wing on Tuesday.
The government at midnight past Monday promulgated an ordinance dissolving the National Board of Revenue and replacing it with two new divisions under the finance ministry.
One is the Revenue Policy Division, which will draft tax laws, set rates and manage international tax treaties, and the other is the Revenue Management Division, which will oversee enforcement, audits and compliance.
In an explanation titled 鈥榃hy Bangladesh is splitting the National Board of Revenue鈥�, the CA鈥檚 press wing said that there was growing consensus that a single institution should not be responsible for both creating tax policy and enforcing it on the ground that such an arrangement breeds conflict of interests and promotes inefficiencies.
For years, businesses in Bangladesh have complained that policies have often prioritised revenue collection over fairness, growth and long-term planning, it added.
Calling it a major structural reform, the CA鈥檚 press wing said, 鈥楾his decision aims to separate tax policymaking from tax administration to improve efficiency, reduce conflict of interest and broaden the country鈥檚 tax base.鈥�
It observed that the NBR had consistently failed to meet its revenue collection targets over the past fifty years.
Bangladesh鈥檚 tax-to-gross domestic product ratio is approximately 7.4 per cent, one of the lowest in Asia, against the global average of 16.6 per cent.
To achieve the development aspirations of its people, Bangladesh must raise its tax-to-GDP ratio to at least 10 per cent.
Restructuring the NBR is critical to achieving this goal, the CA鈥檚 press wing said.
It has also identified several long-standing issues that plagued the NBR.
The issues were conflict of interest, inefficient revenue collection system, weak governance, bureaucratic overlap, demoralisation and internal tensions.
On the conflict of interest, the CA鈥檚 press wing said that housing both policymaking and enforcement under one roof had led to compromised tax policies and widespread irregularities.
Under the system, officials responsible for tax collection were not subject to any accountability framework and were often able to negotiate payments from tax defaulters compromising public interest.
In many cases, tax collectors were reluctant to take action against tax evaders and assisted them in doing so for personal interest, said the CA鈥檚 press wing.
It said that the new structure was designed to address chronic problems through a clearer and more accountable framework.
This separation will ensure that officials setting tax obligations are not the same as those collecting them, eliminating opportunities for any sort of connivance, said the CA鈥檚 press wing in its explanation.
It said that the separation would also allow the dedicated policy unit to craft evidence-based, forward-looking tax strategies instead of reactive policies driven solely by short-term revenue goals and enhance investor confidence by transparent and predictable policies.