Bangladesh's National Board of Revenue was created under the NBR Order 1972, consolidating customs, VAT, and income tax under a single body that simultaneously set tax policy and collected revenue. For five decades this dual mandate created a structural conflict: the same institution that drafted exemption schedules also collected from the firms receiving exemptions. The resulting tax expenditure -- 2.9% of GDP in direct taxes alone per the NBR's own FY2021-22 report -- represents forgone revenue that accumulated through politically connected carve-outs rather than principled policy design.

The tax-to-GDP ratio stagnated at 7.3-7.6% across FY2023-FY2025, the lowest in Asia-Pacific per OECD Revenue Statistics 2024, and roughly half the South Asian average. India collects approximately 11% of GDP in tax revenue, Pakistan 10%, Sri Lanka 9%. Bangladesh collects 7.4%. The gap cannot be closed by rate increases alone: the base is the problem.

The May 2025 Ordinance: Structure and Rationale

On 13 May 2025, the interim government promulgated the Revenue Policy and Revenue Management Ordinance 2025 via presidential order, dissolving the NBR and creating two entities. The Revenue Policy Division (RPD) is responsible exclusively for tax legislation, rate-setting, exemption policy, and treaty negotiation. The Revenue Management Division (RMD) handles assessment, collection, audit, enforcement, and taxpayer services. Both report to the Finance Ministry as ministerial divisions -- a structural choice that became the central point of controversy.

The ordinance's rationale was to break the policy-collection conflict of interest and align Bangladesh with international best practice: the Philippines' Bureau of Internal Revenue and Revenue Memorandum Circulars follow this model, as does Sri Lanka's revenue restructuring under its own IMF program. The IMF made revenue administration restructuring a prior action for disbursement under the combined EFF/ECF/RSF Third and Fourth Reviews, linking "

approximately US$1.3 billion in disbursements to the reform's credible implementation.

Implementation: Incomplete and Contested

The ordinance did not survive its first month uncontested. NBR revenue officers and customs officials launched a nationwide pen-down strike in May-June 2025, briefly halting operations at Chattogram Port and disrupting VAT and income tax processing. The government issued a revised ordinance. By end-2025, the Finance Adviser had stated the split would be completed before the February 2026 general election. As of May 2026, public reporting does not confirm full operational separation: the NBR website (nbr.gov.bd) continued to function, and permanent leadership appointments for RPD and RMD have not been publicly announced.

The bureaucratic wrangle has a structural source: the Bangladesh Civil Service tax and customs cadres resist absorption into a structure dominated by generalist Secretariat officials. The advisory committee that originally designed the reform had recommended an independent statutory agency -- not two ministerial divisions. By overriding that recommendation, the government created the legal architecture TIB warned against.

TIB's Warning: Executive Capture

Transparency International Bangladesh stated that the reform placed 'revenue management at risk of coming under executive control', noting that converting NBR into ministerial divisions rather than a statutory body removes the minimum autonomy that effective revenue administration requires. The critique has international precedent: IMF technical assistance consistently recommends semi-autonomous revenue authorities (SARAs) over ministry-embedded structures because the latter are susceptible to political interference in audit selection, large taxpayer assessments, and exemption administration.

The reform as implemented is a compromise -- structurally weaker than SARA best practice, structurally stronger than the pre-2025 integrated NBR. Whether it delivers the intended insulation depends on the calibre and independence of RPD and RMD leadership, which has not yet been demonstrated.

The Compliance Gap: 64% of TIN Holders Do Not File

Bangladesh has approximately 11.2 million registered TIN holders but only around 4 million filed income tax returns in FY2024-25. The 7.2 million non-filers represent a compliance gap of 64%. The NBR chairman has acknowledged that enforcement against non-filers is constrained by insufficient staffing per tax zone and limited automation.

From 4 August 2025, income tax e-return filing was mandated for all individual taxpayers. The electronic mandate is necessary but not sufficient: the NBR's automation project (Tk 1,019 crore) targets curbing evasion, but enforcement capacity -- field officers per zone, audit bandwidth, penalty recovery -- has not kept pace with TIN registration growth.

The compliance gap is the largest single lever available. Raising the filing rate to 60% of registered TIN holders (from 36%) at current average assessed income would add "

approximately Tk 15,000-20,000 crore in annual revenue without a single rate change. No precise enforcement roadmap for achieving this has been published under the RMD transition.

Transfer Pricing: Eight Staff for 1,000-Plus Multinationals

Bangladesh's Transfer Pricing Cell, created under the Income Tax Ordinance and formalised under the Income Tax Act 2023, had 8 officials as of November 2024 -- including 2 posted abroad -- managing transfer pricing as an additional responsibility rather than a primary function. The cell conducted its first formal transfer pricing audit only in late 2024, targeting a small subset of the 1,000-plus registered multinational enterprises operating in Bangladesh.

Transfer pricing represents one of the highest-risk areas for base erosion: intra-group pricing of services, royalties, and financing between Bangladesh subsidiaries and foreign parents is largely unverified at current capacity. The RMD structure was expected to consolidate transfer pricing under a dedicated large taxpayer unit, but no staffing plan or timeline has been announced.

FY2026-27 Target: 21% Growth Against a Structural Deficit

The proposed FY2026-27 NBR revenue target of Tk 6.04 lakh crore requires 21% growth over "

the FY2025-26 original target. This is the most ambitious nominal target in Bangladesh's fiscal history, set against consecutive years of significant shortfalls: Tk 60,110 crore missed in FY2025-26 (despite 13% collection growth) and Tk 46,000 crore missed in the first half of FY2025-26 alone (despite 14% growth).

Achieving the FY2026-27 target requires simultaneous success across: completing the RPD/RMD operational transition, enforcement against 7.2 million non-filing TIN holders, VAT exemption rationalisation (IMF structural benchmark), and first-generation transfer pricing enforcement against multinationals. No individual reform is sufficient. Each reform's implementation timeline remains unpublished as of May 2026.

The 21% target is not inherently unachievable -- Bangladesh's nominal GDP growth creates a natural base -- but the structural reforms needed to close the compliance gap will take two to three fiscal years to yield measurable revenue gains. Setting the FY2026-27 target at 21% while the reform architecture is still incomplete creates the conditions for a fourth consecutive year of significant shortfall.

Policy Priorities

Three actions are prerequisite for the revenue reform to yield results:

Publish RPD/RMD leadership and staffing plans. The operational transition cannot be "

assessed without knowing who leads each division, how cadre assignments are determined, and what the audit and enforcement complement will be in RMD. Opacity on this point is "

the primary governance risk identified by TIB.

Mandate a published compliance enforcement roadmap for TIN non-filers. The e-return mandate of August 2025 is the framework; enforcement against the 7.2 million non-filers requires a zone-by-zone staffing and technology plan with quarterly targets.

Establish a dedicated transfer pricing unit under RMD with a published hiring plan. Eight staff managing 1,000-plus multinationals is not a transfer pricing program -- it is a token gesture. The revenue potential from arm's-length enforcement against intra-group transactions in garments, pharmaceuticals, and telecoms alone justifies a unit of 60-80 qualified professionals.