Bangladesh is staring at a daunting fiscal chasm as the National Board of Revenue (NBR) struggles to achieve even its revised revenue collection targets for 2024-25. The gap threatens not only macroeconomic stability but also the credibility of the government’s fiscal discipline. With the budgeted revenue target for the upcoming fiscal year 2025-26 set at a record Tk 564,000 crore, economists caution that without sweeping tax reforms and structural change, the lofty goals remain unattainable.
Revised Targets, Persisting Shortfalls: The original revenue collection target for FY2024-25 was Tk 480,000 crore, later adjusted down to Tk 463,000 crore to reflect economic fragilities. Despite the downward revision, NBR ended 11 months into the fiscal year with a staggering Tk 66,678.9 million shortfall in May. With only June left, the agency must collect Tk 135,717 crore in a single month to meet the revised target--an almost impossible feat.
Up to May, NBR’s cumulative collection stood at Tk 327,782.26 crore, far behind the Tk 394,460.45 crore ambition. Income and travel tax collection lagged by over 37.27%, VAT collections by 26.73%, and import-export duties by 22.97%.
Looking ahead, the FY2025-26 budget is even more ambitious. Total revenue has been projected at Tk 564,000 crore, of which Tk 499,000 crore is expected via NBR. Economists warn this stretch will need urgent reforms, as the current tax ecosystem lacks the capacity for such a jump.
Think Tank Warnings: Structural Deficiencies Ahead: CPD (Centre for Policy Dialogue) has consistently raised alarms over the widening revenue gap. It predicts the shortfall for FY2024-25 could soar to Tk 105,000 crore-or even Tk 150,000 crore, according to earlier warnings.
CPD’s Executive Director Dr. Fahmida Khatun emphasised:”Revenue collection growth in the first nine months was only 5%, compared with over 13% last year. A 64% growth is now needed in the remaining three months to meet the target-simply not realistic.”
In another critique, Dr. Khatun pointed out that the proposed FY2025-26 budget’s reliance on revenue growth represents a dangerous political aspiration disconnected from economic reality. She warns that sweeping new taxes or deregulatory measures could spark inflation and economic hardship.
Moreover, the CPD flagged that Bangladesh’s tax-to-GDP ratio barely reaches 9%, compared to 23% in India and over 30% in OECD nations. Weak taxpayer compliance, inefficient revenue administration, and a narrow tax base remain persistent problems.
IMF Pressure and the Structural Reform Imperative: In mid-June, the International Monetary Fund (IMF) pressed Dhaka to increase the tax-to-GDP ratio to 9% in FY2025-26, as stipulated in a USD 4.7 billion loan arrangement. This translates to an additional Tk 570 billion in revenue-ambitious even by NBR’s standards. The IMF blueprint outlines structural measures such as broadening the taxpayer base, eliminating VAT exemptions, adopting unified VAT rates, mandatory e-filing, using scanners at ports, and making revenue administrations more autonomous and transparent. However, the interim government has pushed back, citing concerns over inflation and enforcement capacity.
Voices of Caution: Economists Demand Realism: Dr. Mustafa K. Mujeri, former head of BIDS, remarked:”High revenue targets are permitted, but without realistic planning they’re counterproductive. Bangladesh has repeatedly missed its targets-an actionable roadmap linking tax policies to enforcement is essential.”
Former NBR Chairman Md. Abdul Majid echoes this sentiment, highlighting the need for stronger enforcement, especially toward primary and corporate taxpayers. He warns that merely raising targets without compliance mechanisms will continue the cycle of failure.
Practitioner Insight: Business Leaders Weigh In: Business leaders also recognize the unsustainability of the current revenue architecture. Md. Majedul Haque, a noted economic analyst and TIB board member, emphasizes the need for digital tax systems and fair policies.
“The current structure can’t meet the targets. We need wide digital coverage, e-filing tools, and transparent incentive systems-especially for SMEs. Otherwise, the private sector will continue to struggle,” he told this correspondent.
Bottlenecks at Every Level: Despite multiple attempts to adjust revenue targets mid-year, shortfalls remain. A March report from bdnews24.com found NBR missed its revised target by Tk 580 billion in just eight months, although collections rose slightly over the previous year.
VAT hikes on over 100 goods and services mid-year provided a temporary boost. Still, business lobbying forced reversals on some increases-further denting revenue potential.
Inflation and Social Considerations: Economists caution that raising direct taxes and duties amid ongoing inflation (above 9%) could have grave social consequences. Dr. Fahmida Khatun argues the government must weigh fiscal reform against the hardship faced by ordinary citizens.
CPD proposed raising the tax-free income bracket from Tk 3.5 lakh to Tk 4 lakh, helping shield low-income earners without compromising revenue significantly. It also urged tighter controls on VAT exemptions and subsidies for fossil fuels-factors that erode revenue resilience.
Analysts Warn: Not Just Revenue, But Structural Integrity: Reddit contributors in r/BangladeshEconomics point out institutional shortcomings:”A precondition… is a strong and efficient tax administration, policy and institutional reforms,” said one.
Another contributor emphasizes inconsistent tax policies:”At a time of austerity, the govt prefers to tax its own people heavily… instead of reducing its own size or attracting investment.”
What Needs to Change: Recommendations from Experts: Tax Administration Reform. Separate policy and implementation divisions within NBR.Fully digitize tax returns, payments, audits, and compliance.Expand coverage via e-invoicing and electronic fiscal devices.
Broadening the Tax Base and Simplifying Tax Structure: Broaden income tax net, including informal sectors.Standardize VAT at a flat 15% and reduce exemptions.Enforce tax collection on digital services, financial transactions. Strengthen Compliance and Enforcement. Use alternative dispute resolution to expedite tax disputes.Introduce scanners and digital tracking at customs.Increase audits of large taxpayers and multinationals. Protect Socioeconomic Equity. Increase tax-free threshold to Tk 4 lakh.Shield low-income earners from VAT hikes.Phase out regressive subsidies and exemptions.Holistic Budget Planning. Align fiscal targets with realistic GDP projections (~5.5%).. Prioritize domestic revenue to replace foreign borrowing and support capex. Governance and Accountability. Increase transparency with performance metrics for NBR and related bodies.Reform audit systems, including independent statistical reporting.
The Way Ahead: Balancing Ambition with Capability: Bangladesh’s FY2025-26 revenue goal reflects both necessity and ambition. With a projected budget deficit of 4.6% of GDP, the interim government has prioritized fiscal discipline and public finance sustainability. But experts argue that without institutional reform and realistic planning, heavy targets may derail both revenue collection and economic stability.
Dr. Fahmida Khatun summarizes the conundrum:”Relying on new taxes will burden citizens. The budget must align with domestic conditions and focus on institutional capacity-not fanciful targets.” Dr. Mustafa Mujeri reiterates:”Future revenue targets need strong enforcement and accountability measures. Otherwise, they’re just numbers on a page.”
Reform Must Accompany Ambition: Bangladesh faces a defining moment. Its ability to mobilize revenue is not just about meeting financial targets-it’s a test of governance, policy coherence, and developmental ambition.
The current mismatch between targets and capacity risks fiscal stress, inflationary pressures, and stalled public investment. But the roadmap is clear: reform the tax system, upgrade digital and administrative infrastructure, widen the tax base, and safeguard social equity.
Only then can Bangladesh realistically aspire to transform its budget from a ledger of unmet dreams into a reliable engine for development. Intelligence, institutional strength, and political will must guide the journey ahead.
