The New NBR Ordinance: Good Intentions, Questionable Methods?

The government has recently with a rather dramatic flourish, disbanded long-standing institution of collecting revenue of the country- NBR. In its place, we now have two new entities: the Revenue Policy Division and the Revenue Management Division.

On paper the goal seems laudable. The idea is to separate the minds devising tax policy from the hands collecting the taxes. Many can see the theoretical appeal of this decision. It could potentially reduce conflicts of interest, boost efficiency, and help lift Bangladesh’s stubbornly low tax-to-GDP ratio. However, the way this decision landed quite suddenly through an official order, with little public discussion or forewarning has sent ripples of concern through tax circles concerned communities. There’s a palpable fear that instead of streamlining, this could tangle us in more red tape and sow confusion among the concerned officials.

For decades, the NBR has been the backbone for funding Bangladesh’s development. Yes, it had its share of criticisms – often labelled slow, inefficient and sometimes lack necessary capacity for tax collection. But it also oversaw significant progress, with its officials determined to shed the skin of corruption from their body.

This new structure is pitched as the remedy for those old ailments. But what we observed, only time and perhaps a good deal of careful navigation will tell if the cure isn’t more disruptive than the disease.

For long, the NBR wasn’t just an institution; it was the backbone of Bangladesh’s domestic resource mobilization. It collected over 86% of the country’s total tax revenue. Think about this: from a mere BDT 166 crore back in FY1972-73, revenue collection skyrocketed to nearly BDT 3,82,678 crore in FY2023-24. This reflects an impressive 16.4% average annual growth.

Yet, the elephant in the room remains, Bangladesh’s tax-to-GDP ratio. Which hovers around 7.4% in FY2023-24. This figure is one of the lowest in Asia and a far cry from the global average of 16.6%. However, expert suggested that this figure in last years, could be the lingering effect of the then regime’s GDP revaluation.

Now, it’s tempting to point fingers solely at NBR’s efficiency, or lack thereof. But research suggests the story is far more complex. We’re talking about deep-seated systemic and structural barriers. Consider the overly generous tax exemptions, which amount to a staggering 3.8% of GDP in direct taxes alone. Then there’s the vast informal economy, challenges in human resource development within tax bodies. These are not trivial issues. They scream for careful, comprehensive reforms and not necessarily an abrupt institutional dismantling- an approach that, to many, would be like cutting off one’s head to cure a headache.

If we look at the NBR’s historical performance, it’s a mixed bag. We’ve seen impressive growth spurts, like a 32.18% jump in 2022 and a 27.82% rise in 2017. But these were interspersed with downturns including a significant 30.07% drop in 2020 and even negative growth in 2015 and 2016. Despite these fluctuations, the recent trend showed a promising recovery in tax collection with a reported 15% increase over 11 months of the current fiscal year. This kind of data doesn’t suggest an institution beyond repair, rather it suggests one grappling with complexity and in need of continuous thoughtful reform.

Then came May 12, 2025. The government announced the big change, dissolving the NBR and birthing the two new divisions. The stated aim was to separate tax policy from collection, thereby reducing conflicts of interest and improving overall efficiency. A noble goal we believe, without any intention of serving questionable partisan interests.

However, the manner of its execution has raised more than a few eyebrows. Many observers felt that the decision to dismantle the NBR was rushed without the thorough discussion or consultation with those who understand the intricacies of the tax system. What’s particularly telling is that the Advisory Committee on NBR Reforms – a body specifically set up to guide these changes – apparently never called for a complete shutdown of the NBR. It seems their detailed recommendations were largely sidestepped, and actions were taken middle of the night. One might wonder, why!

One can’t help but wonder about the underlying circumstances. Some speculate this move might consolidate power in the hands of top bureaucrats from outside the specialized tax cadres. Others whisper about potential influence from international bodies like the IMF, though concrete proof remains elusive. What’s also concerning are reports suggesting that experienced tax officers might be sidelined, replaced by generalist bureaucrats who, with all due respect, may lack the deep nuanced understanding of tax matters. This isn’t just an administrative shuffle; it could create real operational headaches especially when quick, informed policy adjustments are needed.

When we look for solutions, we often cast our gaze internationally. A comparative glance at global revenue agencies reveals a very different approach to reform. Take Canada, the UK, or Australia. These countries maintain integrated yet autonomous revenue agencies that operate under parliamentary oversight.

None of these successful systems have opted for the kind of bifurcation Bangladesh is now attempting. The clear global trend is towards professionalizing, digitizing, and granting greater autonomy to tax authorities, not fragmenting them. This makes one question the unique path Bangladesh interim has chosen.

Since the ordinance was passed, the situation on the ground appears to have become quite turbulent. We’re hearing about massive disruptions in revenue administration. Nationwide pen-down strikes by NBR staff have reportedly brought field offices to a standstill. The estimated daily losses are around BDT 1,200 crore, a staggering number. The revenue shortfall for FY2024-25 has apparently already hit BDT 72,000 crore. This isn’t just a number; it directly threatens budget implementation and the funding of essential development projects. Now, add to this receipe, a lack of clarity in new roles, potentially incompatible bureaucratic structures, and a demoralized workforce, a serious crise is brewing.

Let’s be clear: the old NBR wasn’t perfect. Issues like weak leadership at times, political appointments, underinvestment in crucial automation, and patchy inter-agency coordination were real and needed addressing. However, the fundamental question is: does dissolving the entire institution truly tackle these root causes? Or does it merely introduce a fresh set of bureaucratic headaches?

Rather than wholesale dismantling, I believe a path of structural modernization and gradual, considered reform would have been and perhaps still could be more effective.

Over the past few years, Customs, VAT, and Income Tax sectors have all seen some degree of automation, which is a positive step. Customs, for instance, utilizes ASYCUDA, developed by UNCTAD, for its assessment processes. We’ve also seen the introduction of online VAT registration and returns, online TIN acquisition, and the nascent stages of online income tax return submissions. The next crucial phase involves not only further enhancing these individual systems but forging robust interconnections between them. Imagine the synergy if these platforms could communicate seamlessly. Furthermore, a significant leap could be made by mandating that all business and commercial transactions nationwide be conducted through formal banking channels. If we can achieve this kind of comprehensive automation and channel formalization, the opportunities for tax evasion would naturally shrink. Direct contact between taxpayers and tax collectors could be minimized and can likely reduce avenues for corruption.

It’s clear that simply dismantling the NBR doesn’t get to the heart of the matter. The real challenges – things like inconsistent leadership, the shadow of political influence, and a system crying out for modernization through automation – remain firmly in place. So, what’s a more constructive path forward?

The government should seriously consider giving the NBR statutory autonomy. Then there’s the question of who should lead. It’s vital to ensure that individuals with deep, practical knowledge of tax intricacies are at the helm. This means looking within the revenue cadre for leadership, appointing people who’ve spent their careers mastering the complexities of taxation, rather than generalist administrators.

And we can’t do any of this in a vacuum. Meaningful reform demands openness. The recommendations from the Advisory Committee shouldn’t just be internal documents. They need to be out in the open, discussed and debated.

Reforming Bangladesh’s revenue administration isn’t just necessary; it’s urgent for the nation’s continued progress. However, from my vantage point, dismantling a time-tested institution like the NBR without exhaustive planning and deep stakeholder engagement risks creating a cascade of new problems. True, sustainable reform must be driven by clear national interest.

Only then can we hope to achieve the fair, efficient, and future-ready revenue system that Bangladesh needs to support its growing journey toward becoming a prosperous, middle-income nation.

Writer: Rumana Huque, Professor of Economics, Department of Economics, University of Dhaka