Originally posted in New Age on 24 September 2026
Tax-to-GDP ratio falling since FY12
In FY26, it was 6.78pc while 9.8pc in FY12
Bangladesh’s tax-to-GDP ratio has remained at a decades-low level, with revenue collection failing to keep pace with economic expansion and leaving the country with one of the weakest tax bases in the region.
The ratio stood at 6.78 per cent in FY2025-26, according to provisional National Board of Revenue data, and remained little changed from levels recorded over the past several decades.
The revenue challenge has become more urgent as Bangladesh approaches graduation from the Least Developed Country category.
The government’s LDC Graduation Roadmap for 2026–2029, the NBR’s ‘One NBR’ reform and its Medium- and Long-Term Revenue Strategy have all placed greater domestic resource mobilisation, expansion of the tax base, digitalisation and improved compliance at the centre of efforts to raise the tax-to-GDP ratio.
NBR data showed that the ratio remained mostly between 7 and 8 per cent over the past 25 years, briefly approaching 10 per cent, reaching 9.8 per cent, between FY2011-12 and FY2014-15 before falling again.
According to the General Economics Division, the ratio was about 8.5 per cent in FY2015-16, fell to around 7 per cent by FY2017-18, recovered to 7.6–7.7 per cent in FY2019 and FY2020, and declined again to about 6.6 per cent in FY2024-25.
The latest provisional NBR figure of 6.78 per cent for FY2025-26 highlights the persistent weakness in domestic revenue mobilisation.
The government’s revenue buoyancy figure also points to the problem. The 10-year average was only 0.93, meaning revenue collection grew more slowly than nominal GDP on average.
The World Bank has said a tax-to-GDP ratio of 15 per cent is needed to finance essential development needs, putting Bangladesh at less than half that benchmark.
‘Revenue does not go up simply because rates go up on paper. There is a huge gap between what people actually pay and what the exchequer receives, and that gap is where the leakage happens,’ said Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue.
The weak domestic revenue mobilisation has long constrained investment in education, health, social safety nets and infrastructure, he added.
Bangladesh’s tax-to-GDP ratio also remains below those of several regional and developing economies.
The ratio is about 21 per cent in India, 19 per cent in Nepal, 13 per cent in Bhutan and 11 per cent in Pakistan. Among African developing economies, it is about 15 per cent in Ghana and 21 per cent in South Africa.
The most striking feature of Bangladesh’s performance is its relative stagnation. While the ratios of countries such as Bhutan and India have fluctuated over a much wider range, Bangladesh has remained below 10 per cent for most of the period, according to Medium- and Long-Term Macroeconomic Policy Studies data.
The World Bank has said tax rates in Bangladesh are comparable to, and in some cases higher than, those in peer countries.
The problem instead lies in the structure and administration of the tax system, which the World Bank says is burdened by multiple rates, extensive exemptions, and a complicated administrative structure.
Heavy dependence on trade-related taxes has also created what the World Bank described as an anti-export bias.
The size of the informal economy further narrows the tax base. Government estimates show that the informal economy accounts for about 85 per cent of employment and 43 per cent of GDP.
A substantial gap also exists between registered taxpayers and actual return filers.
Although about 12 million people held Taxpayer Identification Numbers by FY2025, only 4.6 million filed tax returns. Only 2.6 per cent of the population filed income tax returns in FY2024-25, according to finance ministry data.
The NBR faced a revenue collection shortfall of Tk 87,527 crore in FY2025-26, collecting Tk 415,473 crore against a target of Tk 503,000 crore.
In FY2024-25, the revenue agency collected Tk 370,874 crore against a target of Tk 463,500 crore.
Against this backdrop, the government’s National Roadmap for Smooth, Sustainable and Irreversible LDC Graduation 2026–2029 has identified domestic resource mobilisation as one of its five transformational pillars.
The roadmap targets raising the tax-to-GDP ratio from a baseline below 7 per cent in 2026 to at least 9 per cent by 2029.
It also includes a Revenue-GDP Enhancement programme covering reforms to commercially viable state-owned enterprises, greater transparency in non-tax revenue, and improved fee collection.
The NBR has also set staged targets to raise the tax-to-GDP ratio to 8.8 per cent in the short term, 10 per cent in the medium term, and 15 per cent by 2035.
Under the ‘One NBR’ architecture, the revenue board is seeking to integrate income tax, VAT and customs into a unified taxpayer-management system.
The NBR’s Medium- and Long-Term Revenue Strategy, a 10-year framework, focuses on formalising the tax base, encouraging voluntary compliance, modernising tax administration through digitalisation and strengthening legal and accountability mechanisms.
An NBR official said the revenue targets could not be achieved simply by increasing tax rates and instead required a broader tax base, greater use of technology, better data and improved compliance.
He said the revenue board was strengthening its institutional and operational capacity, which had now become a state priority, particularly as Bangladesh sought to increase domestic revenue mobilisation while supporting economic growth.
Mustafizur Rahman said Bangladesh needed to reduce revenue leakages through greater digitalisation and stronger oversight of tax collection.
‘Political and commercial influence allowed many influential individuals to pay less tax than they should or avoid paying taxes altogether. This needs to be addressed,’ he said.
He stressed the importance of government goodwill in tackling the problem, saying there was a significant gap between the revenue the government collected and the amount people should contribute.
He said the country needed to bring more economic activity into the formal tax net, revise exemptions, improve taxpayer services, enforce filing requirements among existing TIN holders and make greater use of digital systems and data.
