Revenue Reform Remains Unimplemented

Throwing the revenue reform into the gutter Is not silly but a serious matter.

It appears that the ruling party has kept its words by not implementing the revenue reform. At the heart of this reform is the separation between revenue policy department and revenue implementation department. Past interim govt even made Revenue Policy and Revenue Administration Ordinance 2025 (see http://bdlaws.minlaw.gov.bd/act-details-1537.html),which is in line with the IMF reform list. Incumbent Finance Minister before the election said his party would support independence of the central bank but oppose splitting the NBR into two bodies.

What does this new ordinance contain? Govt will appoint people to revenue policy department. Tax Appellate Tribunal and Customs, Excise and VAT Appellate Tribunal will be under the auspices of revenue policy department. Its jobs include formulation of tax policy, raising/lowering taxes, tax law amendment, evaluation of tax management, negotiations on international customs agreement, research, revenue forecast and estimation among other things.

Staffs of revenue administration department will be drawn from BCS cadres. Revenue administration is tasked with implementation of various tax laws and regulations, implementation of international customs agreement, implementation of international agreement on abolition of double taxation, staff management, making and implementing budget for the department, initiating tax awareness building campaign,undertaking audit and surveillance programs etc.

The splitting of the NBR will make the policy department's influence weaker over the administration department. At present NBR could impose excise duties or [raise] taxes in the middle of the year in a bid to meet the revenue target. The move ultimately increases cost of doing business. Many investment initiatives sustain cost overrun because of unpredictable nature of tax policies. It is anticipated that NBR reform would bring predictability in tax policies [by] not raising cost of businesses in a given year.

And most importantly the reform may put an end to policies driven by political vendetta. The NBR Order of 1972 makes NBR a powerful institution. If one reads the clause #4 of The NBR Order, then one can have some idea about the power wielded by the NBR. The clause states that govt can make rules at its whims and NBR officers can take actions whatever they wish before the rule is actually made. Those actions before the rule cannot be put under scanner later (see The NBR Order 1972, https://nbr.gov.bd/uploads/acts/9.pdf). In the past we saw how the NBR was used to harass the political opponent. Fear is that outrightly throwing the idea of splitting the NBR may continue political vendetta driven actions.

Revenue reform will not only put restraint over overwhelming power of NBR,it will also bring the much needed predictability about revenue policymaking. And it will benefit both business and individual alike in terms of giving idea about the vernacular cost. At the same time, it will improve the political environment by ending use of NBR as a docile instrument to harass others. But by not making the ordinance into a law , govt throws cold water into such bright possibilities. I hope govt will reconsider its decision.

Rising Public Debt Clips The Wings

The woe called rising public debt Makes difficult choices amid revenue regret.

Govt is planning to seek $2 billion foreign credit to mitigate challenges of energy security caused by ongoing war. Meanwhile, govt's debt service management has already crossed $3 billion matching the incoming flow of aid this fiscal year. Asian Development Bank hinted that it [would] provide credit to meet the emerging need from oil price shock. Ailing economy needs further cash to recover. And it is coming from foreign credit. Bangladesh's overall foreign credit stands at $113.51 billion at the end of December 2025. Govt borrowing accounts for 82% of the total foreign credit. Private sector accounts for the rest.(Source: Bangladesh Bank)

According to a study by IMF,global public debt reached 93.9% of GDP and projected to cross 100% by 2028(see "High Debt,Hard Choices" by Era Dabla-Norris and Rodrigo Valdes,March 2026,IMF,https://www.imf.org/en/publications/fandd/issues/2026/03/high-debt-hard-choices-era-dabla-norris). As the public debt rises,so does the interest payment. This fiscal year alone govt paid $950 million as interest payment. By the end of this fiscal year it would cross the billion [dollar] mark. The situation makes the task of resource mobilization even harder. The IMF study also shows that interest payments take away 21% of tax revenues in low income countries. This money could have been spent on social security programs and development programs.

Tax revenues that help financing the development and social security programs are not in a good shape. Against a target of Tk 3.25 trillion ,NBR managed to collect Tk 2.54 trillion of revenue till February this year, registering a shortfall of Tk 714 billion(Source: NBR). This year revenue target is set at Tk 5.54 trillion. Failure to meet revenue target means the money has to come from somewhere else. Borrowing is a popular option. As Bangladesh is scheduled to graduate from LDC countries within two years, overseas borrowing will be costly for us. Battered economy, poor credit ratings have already made costly the foreign credit. Too much borrowing from domestic sources translates into less credit to private sector. What is worrying too much borrowing amid high debt and inadequate revenue has consequences. The IMF study cautions:

"But today, the era of easy choices is over. Every dollar a government borrows without matching revenue implies higher taxes or lower spending in the future, at least to cover the additional interest the new debt generates. Beyond a certain point, more borrowing forces painful decisions—through austerity, inflation, financial repression, or even default."

Amid the grim fiscal situation, govt undertakes ambitious social security programs where chances of leakages are very high. Previous social security programs were not leakages free. Given no dramatic improvement in governance in the last one year, why will these new ones be different? Meanwhile, borrowed money will finance the deficit budget and tax revenues will go for paying the rising debt instead of development or social security programs. Earlier we used to take debt to finance various programs [aimed] for people and capacity building. Gradually we are entering into a phase where we need debt to pay older debts and interests. Social welfare, capacity building, human development and investment in infrastructure are [going to be] some of the badly hit areas. We need to check our spending and require serious commitment to reforms.