In a bold push to strengthen public finances and support long-term economic growth, the Bangladesh government has set a target to raise the country’s tax-to-GDP ratio to 10.5 per cent by the 2034-35 fiscal year, up from the current 7.3 per cent, one of the lowest in South Asia.
This ambitious goal is part of a newly endorsed Medium-and- Long-Term Revenue Strategy (MLTRS) 2025–2035, designed to modernise the taxation system, improve compliance, and significantly boost domestic revenue mobilisation, officials revealed on Tuesday.
The National Board of Revenue (NBR) will lead the implementation of the MLTRS, a comprehensive reform roadmap spanning the next decade. The strategy is built around six strategic objectives: achieving end-to-end automation of tax processes, enhancing voluntary tax compliance, narrowing the gap between potential and actual revenue, ensuring uniform enforcement of tax laws, strengthening institutional integrity, and ultimately raising the tax-to-GDP ratio.
At present, Bangladesh collects taxes equivalent to just 7.3 per cent of GDP, well below the South Asian average of around 12 per cent and far from the 15-20 per cent seen in middle-income countries.
With public spending on infrastructure, health, and education rising, the government sees increased domestic revenue as essential to reducing reliance on borrowing and ensuring fiscal sustainability.
Automation at the core of reform
Central to the MLTRS is the full digitalisation and automation of NBR operations. The plan will integrate existing initiatives such as the ASYCUDA World system, Bangladesh Integrated Tax Administration System (BITAX), Electronic Fiscal Devices (EFD), and the VAT Improvement Programme (VIP) into a unified, real-time digital platform.
A cross-cutting automation project will streamline customs, income tax, and VAT administration, enabling seamless data sharing, faster processing, and improved taxpayer services. Despite previous reform efforts—including the Tax Modernisation Plan (2011–16), Reforms in Revenue Administration (RIRA), and the Strengthening Governance and Management Project (SGMP), officials acknowledge that Bangladesh remains in the early stages of digital transformation, with many systems operating in silos.
“Bangladesh achieves some of the highest returns on investment in tax system modernisation compared to other developing countries,” said a senior Finance Ministry official, citing the Macro-Economic Policy Statement (2023–24 to 2025–26). “This makes automation a high-impact opportunity to scale up revenue collection efficiently.”
Bridging the compliance gap
A major obstacle to revenue growth is low voluntary compliance, particularly in personal income tax, corporate tax, and VAT. Complex tax laws, outdated administrative practices, limited public awareness, and weak trust in institutions have long discouraged honest taxpayers.
To reverse this trend, the MLTRS proposes simplifying tax procedures, expanding digital filing options, introducing incentives for compliant taxpayers, and launching nationwide taxpayer education campaigns. It also calls for consistent enforcement and penalties to deter evasion.
“Improving compliance isn’t just about stricter audits, it’s about building trust,” said an NBR policy adviser. “When people see fairness and transparency, they are more likely to pay.”
Closing the revenue gap
The strategy also addresses the persistent gap between potential and actual tax revenue. Overly optimistic targets in the Eighth Five-Year Plan (8FYP) have often led to shortfalls, underscoring the need for evidence-based forecasting and realistic goal-setting.
Customs revenue, once a major contributor, is declining due to trade liberalisation and tariff reductions. As a result, the NBR is prioritising direct tax expansion, including broadening the taxpayer base, improving audit mechanisms, and leveraging data analytics to detect underreporting.
The government also estimates that USD 15–20 billion is lost annually to money laundering and illicit financial flows, funds that, if recovered and brought into the formal economy, could significantly expand the tax base.
Institutional integrity and transparency
To strengthen public confidence, the MLTRS places strong emphasis on integrity, transparency, and accountability within the NBR. Plans include enforcing a Code of Ethics and Conduct, strengthening internal audit and anti-corruption units, and protecting whistleblowers.
“Fair and uniform enforcement is key,” said the official. “Taxpayers must believe the system treats everyone equally, no exemptions for the connected, no harassment for the small.”
A gradual but transformative journey
While the full impact of the MLTRS will unfold over the next decade, the NBR aims to achieve a minimum 10 per cent tax-to-GDP ratio by 2032, paving the way for the 10.5 per cent target in FY2034-35.
Future Five-Year Plans will now align with MLTRS benchmarks, ensuring continuity across governments. Officials stress that success will depend on sustained political will, institutional reform, and public cooperation.
“If implemented effectively, this strategy will lay the foundation for a modern, resilient, and equitable tax system,” said the Finance Ministry. “It’s not just about collecting more revenue, it’s about building a fairer economy.”
Source: UNB