Problem statement: The IMF says Bangladesh’s revenue has fallen to about 7% of GDP, among the lowest in the world, and has called for “concerted efforts” to raise it. Low revenue limits spending on health, education and infrastructure, and makes the budget more reliant on borrowing.
Why it matters now: With inflation forecast by the IMF at 10.9% for FY2026-27 and talks on new IMF and World Bank support under way, revenue reform is likely to feature in any financing conditions.
Policy options:
- Broaden the base: bring more businesses and high-income individuals into the tax net through data-sharing between NBR, banks and land registries.
- Rationalise exemptions: review tax holidays and reduced rates, publishing an annual tax-expenditure report.
- Digitise collection: expand online VAT and income-tax filing to reduce discretion and leakage.
- Resolve disputes: speed up tax litigation so locked-up revenue is collected.
Trade-offs: Higher indirect taxes can hurt poorer households during high inflation. Removing exemptions may face resistance from industries that depend on them. Digitisation needs up-front investment.
Recommendation: Prioritise base-broadening and exemption review before rate increases, and protect essential goods from new indirect taxes while inflation remains high.
Confidence level: Moderate. The options draw on common revenue-reform practice; their yield in Bangladesh would need NBR data to estimate.
Related reading: IMF calls for tight monetary policy, broader reforms — The Daily Star
