Reforms in NBR: Corruption major challenge, automation key solution
The National Board of Revenue (NBR) has struggled to meet its revenue collection targets for over a century, facing allegations of favoritism, failure to automate, and widespread corruption among top officials.
Despite frequent discussions about the need for reform, substantial changes within the NBR have not materialised due to various unseen reasons.
Experts argue that meeting revenue collection targets, implementing automation, and curbing corruption among officials are critical challenges for NBR reform.
With the recent change in government, the NBR is attempting to revamp its operations.
The interim government has initiated reforms, including appointing a new chairman, Abdur Rahman Khan, and scrutinising the bank accounts of six major companies, including industrial giants S Alam and Beximco, to prevent tax evasion.
The NBR is poised to take significant steps against tax evaders, with the new chairman sending a clear message about cracking down on corruption within the institution.
Bangladesh's tax-to-GDP ratio, at 7.6 per cent, is the lowest in South Asia, comparable to that of Somalia and the Democratic Republic of Congo. Experts warn that transitioning to a high-income country is impossible with a tax-to-GDP ratio below 10 per cent.
NBR's revenue target shortfall
For 12 consecutive years, the NBR has failed to meet its revenue targets. In the fiscal year 2023-24, despite a 12.17 per cent growth compared to the previous year, the NBR fell short by TK 38,157 crore. The original target was Tk 4.3 lakh crore, later revised to Tk 4.1 lakh crore, but only Tk 3.71 lakh crore was collected. The current fiscal year 2024-25 has set an even higher target of Tk 4.8 lakh crore, raising concerns about the NBR's ability to meet it amidst prolonged business stagnation.
The Policy Research Institute (PRI) earlier this year highlighted Bangladesh's low tax-to-GDP ratio. Former NBR chairman Mohammad Abdul Majid said that while high revenue targets are always set, NBR’s capacity to meet them is questionable, pointing to procedural and infrastructural flaws that need to be addressed.
Call for automation and reforms
Experts agree that internal resources must be bolstered to enhance education, health, and infrastructure services. The tax structure needs to be more supportive of investment and trade to increase revenue collection. Comprehensive reforms, including strengthening the tax administration and increasing the use of technology within NBR, are essential.
Business leaders echo these sentiments. Fazle Shamim Ehsan, Executive President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), emphasised the need for a realistic, business-friendly, and modern revenue board. He criticized the lack of proper automation at NBR, citing issues like the arbitrary changing of Harmonized System (HS) codes, which leads to harassment and bribery.
Corruption remains a significant challenge, with automation seen as a key solution. Ehsan gave examples of Assistant Revenue Officers (AROs) harassing businesses over minor issues like fabric elasticity, highlighting the need for better training and stricter oversight.
The president of the Dhaka Chamber of Commerce and Industry (DCCI), Ashraf Ahmed, stressed the importance of making the NBR more people-friendly and business-friendly through automation. He argued that simplifying the tax collection process would encourage more individuals and businesses to pay taxes, ultimately boosting government revenue.
Addressing corruption and building trust
Dr Mahfuz Kabir, a senior researcher at the Bangladesh Institute of International and Strategic Studies (BIISS), emphasized the urgency of fully automating the NBR, noting that some corrupt officials abuse their discretionary powers, discouraging tax compliance. Automation would significantly reduce harassment and aid in achieving revenue collection goals.
Kabir suggested that the NBR should develop a clear vision for short, medium, and long-term revenue management, rebuild trust, and bridge the gap between the organization, stakeholders, and civil society.
An anonymous senior NBR official highlighted that making the institution paperless and faceless through data integration with other organisations could restore public confidence. He called for strict measures against tax evaders to end the culture of impunity and achieve meaningful reforms.
Addressing past corruption scandals
NBR's image has been tarnished by corruption scandals, including gold theft from the Dhaka Customs vault and ASYCUDA fraud. Investigating these incidents is crucial for reform, according to concerned parties.
In his first press conference as NBR chairman, Abdur Rahman Khan acknowledged the institution's image crisis and vowed to take strict action against irregularities and corruption. He emphasised the need for end-to-end automation, announcing plans to form three separate task forces to modernize customs, income tax, and VAT laws with input from businesses and tax officials.
Khan also called for a long-term policy to avoid disrupting investor plans with frequent changes, stressing the importance of creating a business-friendly environment and ensuring that officials perform their duties properly.
