Tax reform report submitted: What it means for revenue and growth

The national committee tasked with restructuring Bangladesh’s tax system has submitted a reform agenda to Chief Adviser Muhammad Yunus, proposing big structural changes to boost revenue mobilisation and reduce the economy’s heavy reliance on indirect taxation. 

The report, prepared by an 11-member taskforce led by Policy Research Institute (PRI) Chairman Dr Zaidi Sattar, sets ambitious targets for raising the tax-to-GDP ratio to 12% by 2030 and 15-20% by 2035, from the current level of around 10%. 

It also recommends rebalancing the tax mix by increasing the share of direct taxes to 50% from the existing 30%, signalling a shift towards a more equitable and growth-friendly tax regime.

Titled ‘Tax Policy for Development: A Reform Agenda for Restructuring the Tax System’, the report describes Bangladesh’s tax system as unnecessarily complex, inefficient and overly dependent on indirect taxes. It argues that incremental or piecemeal changes will be insufficient to support long-term economic transformation, calling instead for fundamental and structural reforms.

The taskforce identifies 55 policy issues, with seven flagged as immediate priorities. Key recommendations include simplifying the tax structure through greater digitalisation and automation, introducing artificial-intelligence-based risk analysis, expanding risk-based audits, and rationalising tax incentives. The report also proposes a strategic shift away from trade-based taxation towards stronger domestic tax mobilisation.

On customs reforms, the report suggests modernising the tariff structure and applying equal effective protection for export-oriented and import-substituting industries. It also recommends moving away from port-based enforcement towards post-clearance audits, arguing that a separate valuation database for cargo clearance is unnecessary.

In the area of value-added tax, the taskforce proposes moving gradually from a multi-rate VAT regime to a single-rate system to reduce complexity and compliance costs. 

Receiving the report, Chief Adviser Yunus said the interim government had limited time but intended to initiate the implementation process. 

Finance Adviser Salehuddin Ahmed said the document would serve as a guideline for improving both revenue collection and governance, while officials from the Internal Resources Division noted that the report clearly diagnoses existing weaknesses and offers a roadmap for reform.