Scrap SROs, focus on fair taxation Say economists
Staff Reporter :
Economists and analysts have called for a comprehensive review of Bangladesh’s tax policy, recommending a shift away from tax exemptions and indirect taxes in favour of direct taxationto raise the country’s tax-to-GDP ratio – one of the lowest in the world.
Speaking at a panel discussion titled “Strengthening Fiscal Foundations: Enhancing Domestic Revenue Mobilisation for Sustainable Growth in Bangladesh”, experts underscored the urgent need to reconsider long-standing tax benefits and introduce structural reforms to increase revenue collection.
The discussion was part of the opening day of the 6th Bangladesh Economic Summit BES), organised by the student-run Economics Study Center at Dhaka University.
Bangladesh’s current tax-to-GDP ratio stands at approximately 8 percent or lower, while tax expenditures -including exemptions, rebates, and holidays – are estimated to cost the government around 6 to 6.5 percent of GDP, according to participants.
Critics argued that tax exemptions in Bangladesh are frequently issued through Statutory Regulatory Orders (SROs), bypassing the usual parliamentary oversight and often serving the interests of specific groups or sectors rather than the broader public.
The panel, chaired by Professor Dr Selim Raihan of Dhaka University’s Department of Economics, featured Dhruv Sharma, Senior Economist at the World Bank; Professor Sarmind Neelormi of Jahangirnagar University; and Towfiqul Islam Khan, Senior Research Fellow at the Centre for Policy Dialogue (CPD).
Joining remotely from Colombo, Dhruv Sharma highlighted significant challenges in revenue collection, compliance, and policy execution.
He noted that while many South Asian countries maintain a tax-to-GDP ratio of 18-19 percent, Bangladesh remains in single digits. He attributed this gap primarily to an overreliance on indirect taxation, particularly VAT, which accounts for nearly 70 percent of total tax revenue.
Sharma further observed that of the 10 million people with tax identification numbers (TINs), only 3 to 3.5 million are active taxpayers.
One-third of income tax revenue comes from large taxpayers, underscoring a narrow and uneven tax base.
He advocated for a shift toward direct taxes – such as income and corporate taxes – and called for improvements in automation, modernisation of tax policy, and a reduction in tax expenditures.
Professor Selim Raihan echoed these concerns, stating, “Bangladesh has one of the lowest tax-to-GDP ratios globally, severely limiting the government’s capacity to invest in critical sectors such as health and education.”
He also pointed to institutional bottlenecks at the National Board of Revenue (NBR) and an overdependence on indirect taxes as major issues needing reform.
Professor Sarmind Neelormi highlighted public dissatisfaction with tax compliance, saying many citizens are reluctant to pay taxes due to inadequate government services.
“The NBR is granting more in exemptions than it is collecting. These exemptions, often through SROs, are benefitting select groups – and that must be reassessed,” she said.
Towfiqul Islam Khan stressed the necessity of developing an integrated tax database and revisiting long-standing tax holiday policies. He questioned the rationale behind blanket exemptions in sectors such as agriculture, remarking, “If a farmer has a high income, why should they remain untaxed?”
Khan also raised concerns about the misuse of power by some policymakers over the past 15 years and cited the lack of coordination between agencies, allowing tax evasion even in urban areas. “There are individuals in Dhaka who own six or seven apartments, yet escape taxation.
Holding numbers could help identify them – but no action is taken,” he said. “This cannot continue. The use of SROs to benefit specific groups must end.”
The three-day Bangladesh Economic Summit was inaugurated earlier in the day by Dhaka University Vice-Chancellor Professor Dr Niaz Ahmed Khan at the Mozaffar Ahmed Chowdhury Auditorium.
The event is supported by the Centre for Policy Dialogue (CPD), the International Labour Organization (ILO), and the International Growth Centre (IGC).
Special guests at the opening ceremony included Pro-Vice Chancellor (Administration) Professor Dr Saima Haque Bidisha, Department Chair Professor Masuda Yasmin, and club moderator Professor Dr Selim Raihan. The session was presided over by Hasibul Hasan, President of the Economics Study Center.
The summit will continue through Thursday, featuring a series of panels addressing key economic issues facing Bangladesh.