The National Board of Revenue (NBR) is in the process of formulating a new, stricter Tax Exemption Policy, aiming to make it more difficult for individuals to avail themselves of such exemptions. NBR Chairman Md Abdur Rahman Khan stated that the power to grant tax exemptions will now be exclusively vested in Parliament, removing it from the NBR's authority.
He confirmed that the policy is at its final stage, emphasizing that no tax exemption will be granted to any individual unless it's in the interest of the republic.
Currently, individual taxpayers in Bangladesh have received over Tk 40,000 crore in tax exemptions, which is more than double the amount given to companies. This has raised concerns, as some individuals, including those with black money, have exploited these exemptions to pay taxes at reduced rates.
The International Monetary Fund (IMF) has also urged Bangladesh to streamline tax expenditures, as part of the conditions for its $4.7 billion loan package. This includes an annual increase of 0.5% in the tax-to-GDP ratio until FY26.
Tax exemptions in Bangladesh are granted for various purposes, such as promoting local industries, encouraging investment in underdeveloped areas, and attracting businesses to economic zones. However, there have been reports of some industries and individuals exploiting these exemptions through unethical means or undue influence.
Currently, around 102 sectors benefit from partial or full tax exemptions, with 40 of them benefiting individuals and the remainder applied to companies or industries. The NBR has acknowledged that these widespread exemptions are costing the revenue board a significant amount of revenue, with no proper assessment conducted on their overall impact.
Chairman Abdur Rahman Khan pointed out a study that revealed the NBR concedes the same amount in tax exemptions as it collects in revenue. He also highlighted the need for rationalizing tax-related issues and improving operational efficiency among tax officials. He expressed dissatisfaction with the fact that two-thirds of the total income tax returns submitted are zero returns, urging field-level officials to take action on these taxpayers.
