Raising Bangladesh’s Tax-to-GDP Ratio: A Reform Agenda
Following the 2024 student-led uprising, the interim government headed by Nobel laureate Dr. Muhammad Yunus started a mass reform campaign in various fiscal and administrative sectors.
Apart from the people of various economic and social strata of Bangladesh, there are reform suggestions from the development partners.
Of the various reform measures, political parties introduced their manifestos with high hopes of raising the tax-to-GDP ratio.
Currently, the ruling party BNP has a target to increase it to 15% by 2035; Jamaat-e-Islami has a target of 14% within the next 10 years, the NCP 12 percent within five years, and Islami Andolon Bangladesh 14–15 percent.
Meanwhile, NBR’s 10-year strategy predicts it will reach 10.5% by 2035. Now the question arises: are these just the wild imaginations of political parties, or do they have a massive data-driven plan behind them? The answer is still ambiguous.
Among the sweeping promises of social spending, one commitment stands out for its ambition and ubiquity: raising the tax-to-GDP ratio.
Though Bangladesh experienced impressive economic growth over the past decades, the country is burdened with a massive debt.
Approximately 28 trillion BDT was illicitly siphoned abroad from Bangladesh during the Awami League regime between 2009 and 2024.
That has left Bangladesh with one of the lowest tax-to-GDP ratios among middle-income economies in Asia, and the road to recovery is steep. To achieve upper-middle-income status, Bangladesh must shed this black mark.
The country’s low revenue mobilization limits public investment in infrastructure, education, health care, social protection, and climate resilience, which may lead to actual economic recovery.
Political promises are easy to make; the arithmetic behind them is not. Bangladesh’s tax-to-GDP ratio stood at just 6.78 percent in FY2025-26, barely above 6.70 percent the year before and still short of the 7.20 percent recorded in FY2024.
The World Bank puts it at 6.7 percent for FY25, less than half the 15 percent it deems necessary for essential development spending.
Bangladesh’s stagnant revenue effort is structural, not incidental. A vast informal economy sits outside the tax net; income tax coverage remains thin; property and wealth taxation stays underdeveloped despite soaring urban land values; and exemptions, nearly as large as actual collection, erode the base. Weak automation and heavy reliance on shrinking trade taxes compound the problem.
FY2025-26 shows the cost: the NBR collected Tk 4.15 trillion against a Tk 5.03 trillion target, an Tk 880 billion shortfall, despite 12 percent revenue growth. NBR is essentially running at its traditional pace, with systemic reform still missing.
Bangladesh’s tax rates exceed regional peers; the real problem is who and what escapes the net.
Integrating NID, TIN, bank, land, vehicle, and business-registration databases would enable data-driven identification of unregistered taxpayers, particularly professionals and the self-employed.
With tax expenditures nearly matching actual collection, the government’s 2025 Tax Expenditure Policy Framework needs real enforcement: replacing administrative exemption orders with parliamentary approval, publishing annual tax expenditure statements, and phasing out incentives that inflate profits without generating investment or jobs.
Consolidating multiple VAT rates into a single rate, building a functioning input-credit and refund system, and reducing the exemptions that currently narrow VAT’s reach would improve both efficiency and equity.
With urban land values having risen sharply while property tax collection has stagnated, this is the most obvious untapped revenue source and the one every serious analyst flags as indispensable if Bangladesh is to move meaningfully beyond 10 to 11 percent.
None of the above will work without institutional groundwork: separating tax policy from tax administration, finishing the stalled NBR bifurcation, recruiting skilled staff, and building genuine internal-audit and anti-corruption safeguards.
End-to-end automation, unified taxpayer identification, e-filing, and risk-based audits would lift compliance while shrinking the face-to-face contact that breeds corruption.
Tariff dependence should be phased down carefully, so trade liberalization removes Bangladesh’s anti-export bias without blowing a hole in revenue.
None of the promised figures by the political parties and NBR 15 percent, 14 percent, 12 percent, 10.5 percent is inherently more credible than the others merely by virtue of being higher or lower.
What matters is whether each is backed by a sequenced, funded, institutionally grounded plan: a property tax regime, a rationalized exemption list, a digitized NBR, and a political leadership willing to defend unpopular but necessary reforms once elected.
Bangladesh does not lack diagnoses of its revenue problem; the World Bank and the NBR’s own strategists broadly agree on what needs to be done. What it has lacked, election after election, is the political follow-through to do it.
As the country tries to graduate from LDC status and aspires to upper-middle-income status, the tax-to-GDP ratio is not a technocratic footnote; it is the single number that will determine whether that aspiration is fundable.
The window for reform, as with all such windows in Bangladesh’s recent history, will not stay open indefinitely.
Of the recommendations to raise the tax-to-GDP ratio, Bangladesh needs to accelerate digital tax administration that ensures digital invoicing and e-receipts for all types of taxable transactions. Such digitalization will reduce corruption, administrative expenses, tax evasion and tax avoidance.
The next important recommendation is to modernize property taxation by updating the property valuation systems, digitizing land and property records, and strengthening coordination between the local governments and the tax authorities.
There should be significant improvements in building a tax compliance culture through public awareness campaigns, taxpayer education and enhancement of taxpayer services.
Bangladesh also needs to strengthen NBR’s institutional capacity by implementing the reform steps taken during the interim government during the post-July uprising.
Finally, a strong political commitment by the government through stakeholder consultation, transparent communication and phase-by-phase implementation strategies can raise the Tax-to-GDP ratio of Bangladesh.
(The writer is an Associate Professor at Bangladesh Institute of Governance and Management (BIGM)Email: ecozobayer@gmail.com).
