The VAT gap shows that even with current exemptions, Bangladesh could have collected an extra Tk188,081 crore in VAT revenue in FY23, according to a study by the Centre for Policy Dialogue (CPD) released on Tuesday.
It further suggested that Bangladesh should aim for a tax-to-GDP ratio of at least 15% to enhance its fiscal capacity and ensure greater financial stability in the post-LDC graduation phase.
National Board of Revenue (NBR) Chairman Abdur Rahman Khan said that Bangladesh's tax-to-GDP ratio has dropped further to 6.6% in FY25, a decrease from 7.4% in the previous year.
CPD shared the study at a dialogue titled “Reform in Corporate Tax and VAT: A Justice Perspective for NBR,” where the NBR chairman made his remarks.
Khan also said: “Pakistan's deputy prime minister informed us that their country's tax-to-GDP ratio is over 12%, while ours has dropped further to 6.6%, which is alarming.”
Earlier, Tamim Ahmed, senior research associate at CPD, delivered the keynote presentation.
He informed that the CPD, in partnership with Christian Aid (CA), conducted the survey among 123 companies located in Dhaka and Chittagong in December 2024.
According to the survey, 72% of businessmen surveyed believe that tax officials are involved in widespread corruption.
The survey results also showed that a large number of businessmen are dissatisfied with the current tax system.
The survey also found that nearly four out of five businessmen cited a lack of accountability from tax officials. As per the survey, 82% of businessmen believe that the country's tax system is inconsistent and unfair to them.
Tamim further said: “What we did was find out the effective rate (effective rate of VAT), which is 11.7%. With that, we saw how much actual VAT collection we should have. That means even after accounting for existing exemptions, an additional Tk188,081 crore in VAT revenue could have been collected in FY23.”
Firsthand corruption
Tamim Ahmed also stated: “When I went to collect data from the NBR, I too was regrettably asked for a bribe.”
CPD research director Khondaker Golam Moazzem added that while he was not asked for money, he too faced difficulties in obtaining information.
“We also wanted to conduct our study using 2025 data. But unfortunately, when we requested information from the NBR, we faced harassment.”
The CPD survey stated that there is no fixed benchmark in global literature that defines the ideal tax-to-GDP ratio required for a country to fully finance its development plans and achieve sustainable economic growth.
However, data indicate that high-income countries maintain an average tax-to-GDP ratio above 15%, while the global average is also close to this level.
This suggests that Bangladesh should aim for a tax-to-GDP ratio of at least 15% to enhance its fiscal capacity and ensure greater financial stability in the post-LDC graduation phase.
The government has already developed several long-term targets in regard to improving the tax revenue scenario.
However, due to changes in the recent political regime, many of these plans, such as the 9th Five-Year Plan, became outdated or invalid.
The Perspective Plan 2041, however, remains a valid and ongoing target for the country.
This plan serves as a long-term strategy extending through 2041.
As part of this plan, Bangladesh aims to increase its tax-to-GDP ratio to 16.96% from FY 2020 to FY 2041 (on average).
For this study, the benchmark scenario has been set for the fiscal year 2029-30, it added.