Recently, the Chairman of the NBR has outlined several tax-related proposals, including increasing the turnover tax from 1% to 2.5%, introducing a uniform VAT rate of 15%, reintroducing a wealth tax, implementing an inheritance tax, making BIN mandatory for opening business current accounts, increasing taxes on ultra-wealthy individuals, discontinuing tax holiday extensions, imposing capital gains tax on land sales, adopting market-based property valuations instead of deed values, and linking tax systems with bank accounts and utility services.
It is undeniable that the government requires revenue for national development, and a significant portion of this revenue is collected through the NBR. Although there are other sources of income, the NBR remains the main contributor. For the 2026-27 budget, several reform initiatives have been proposed to enhance revenue collection.
However, the number of taxpayers in Bangladesh remains disproportionately low compared to the total population. The tax-to-GDP ratio is also among the lowest in South Asia and significantly below the average for lower-middle-income countries. Moreover, the number of active taxpayers is limited. These challenges reflect structural weaknesses in tax administration and highlight the urgent need to broaden the tax net.
Rather than increasing tax rates or placing additional burdens on existing taxpayers, greater emphasis should be placed on expanding the tax net. The ongoing transition toward an automated tax system is a commendable initiative by the NBR. However, pre-budget discussions suggest that more focus is being placed on increasing taxes on compliant taxpayers rather than significantly widening the tax net.
A considerable number of wealthy individuals still do not pay taxes properly, while many lower-income individuals remain compliant. Linking tax identification with utility services is a positive step and should be implemented nationwide. Traditionally, tax enforcement has been concentrated in urban areas, yet many individuals in rural regions also possess substantial assets and earn significant income.
A considerable number of wealthy individuals still do not pay taxes properly, while many lower-income individuals remain compliant. Linking tax identification with utility services is a positive step and should be implemented nationwide. Traditionally, tax enforcement has been concentrated in urban areas, yet many individuals in rural regions also possess substantial assets and earn significant income. Due to lower living costs in rural areas, even moderate earnings can generate savings, whereas higher urban incomes are often offset by higher expenses. Despite this, rural populations largely remain outside the tax net.
Some of the proposed measures- such as increasing the turnover tax, introducing a uniform VAT rate, and discontinuing tax holiday extensions-may adversely affect the business environment. Similarly, making VAT registration mandatory for opening business current accounts could discourage formal banking practices and create barriers for new entrepreneurs.
On the other hand, proposals such as higher taxes on ultra-wealthy individuals, capital gains tax on land sales, and market-based property valuation are more aligned with equitable revenue reform. However, the concept of a wealth tax requires careful consideration to ensure fairness and prevent tax avoidance or capital flight. Bangladesh does not currently have a separate wealth tax; instead, it applies a surcharge based on net wealth for individuals exceeding 40 million BDT. The recent proposals appear to aim at either reintroducing a formal wealth tax or strengthening the existing surcharge system to ensure that those with greater assets contribute proportionately.
The proposed inheritance tax is entirely new in the local context and must be designed cautiously to avoid double taxation, particularly where assets have already been generated from taxed income. In Bangladesh, inheritance is typically governed by religious laws, and there is currently no tax on the transfer of ancestral property to legal heirs.
Overall, the proposed budget appears likely to increase the tax burden, approaching levels observed in developed countries. This raises a critical question: can the government provide comparable public benefits? In developed economies, citizens typically receive high-quality healthcare, accessible education, strong employment opportunities, social security benefits, advanced infrastructure, reliable utilities, effective rule of law, public safety, environmental protection, and a higher standard of living.
If Bangladesh seeks to impose similar levels of taxation, it must also aim to deliver comparable public services. However, such a transition cannot occur overnight. It must be gradual, allowing the government to strengthen service delivery while enabling citizens to adjust to increased tax obligations.
The country is still recovering from the economic impacts of the pandemic, while global disruptions, including geopolitical conflicts, have further strained the economy. Many businesses are struggling to stabilize, with some closing or relocating, and unemployment remains a concern. Fuel shortages, load-shedding, and rising living costs have added further pressure. Under such conditions, imposing additional tax burdens may hinder economic recovery.
Following the recent election and the formation of a new government, efforts are underway to address fuel and broader economic challenges. Failure to stabilize these issues could significantly affect citizens, leading to higher living costs, increased hardship, and potential social unrest. Rising expenses may also contribute to increased crime rates and public dissatisfaction.
Therefore, it is essential for the government to carefully evaluate these tax proposals. Reforms should be implemented gradually, ensuring economic stability, fairness, and public acceptance. A balanced approach- expanding the tax net while improving public services- will be crucial for achieving sustainable development and maintaining public trust.
The writer is a member of Dhaka Taxes Bar Association
