Govt to strip NBR of revenue policy formulation role 

• NBR now handles both policy and dispute resolution
• Separation aimed at reducing taxpayer harassment
• The new entity will be led by technical expert 
• It will manage revenue policies tax expenditures
• NBR staff may be deputed to policy formulation, research

The government has decided to transfer policy formulation responsibilities from the National Board of Revenue (NBR) to a newly established entity, leaving the NBR focused on only revenue collection.

The initiative aims to enhance fairness for taxpayers, streamline tax compliance, and align with long-standing recommendations from development partners.

The new entity will focus on formulating long-term policies considering economic conditions. Currently, the NBR prioritises immediate targets over strategic goals for the next 15 to 20 years, without fully considering the broader economic outlook.

To implement the shift, the revenue reform committee, led by Former NBR chairman Muhammad Abdul Majid, is exploring appropriate models for the change and the framework for establishing a new entity.

Majid told The Business Standard that currently work is going on regarding designing an independent entity for revenue policies. "I believe it will become a reality in a short time."

He said the decision to separate revenue collection from policy-making from the NBR aims to create a fairer and more transparent system for taxpayers as the current revenue policy and collection system is "disorganised like a jungle".

He mentioned that revenue officials at present who are responsible for revenue collection are also tasked with resolving disputes with taxpayers, which is "absurd and undermines justice".

Majid also said the government is determined to implement this reform, ensuring that the rule of law applies equally to everyone and fosters a more equitable revenue system.

He acknowledged resistance from groups unwilling to relinquish their power within the existing system. "Those who fear losing their control may try to delay the separation process, but we are committed to seeing it through," he asserted.

He further explained that the demand for this separation has existed for a long time, but recent pressure from development partners has accelerated the process. 

Several senior NBR officials, speaking anonymously to TBS, said the Income Tax Policy Wing has proposed creating a separate division under the finance ministry, while the VAT and Customs Wings have suggested forming a department with leadership from the technical cadre. 

They noted that currently the same officials set tax rates and policies, and taxpayers must approach them for appeals, creating a conflict of interest. 

The NBR is pursuing this reform in line with a government commitment to the IMF for a $4.7 billion loan, with support from the World Bank and business leaders, they mentioned. 

Business leaders welcome the move

Mohammad Hatem, president of Bangladesh Knitwear Manufacturers and Exporters Association, welcomed the proposed separation, calling it vital for fostering a business-friendly environment. 

He said separating tax policy and administration would lead to more effective policies and address concerns of harassment by NBR officials. 

He also highlighted the need for policies to be developed by experienced individuals and suggested involving stakeholders in dialogue before policy formulation to increase awareness. 

He stressed the importance of bridging the trust gap between taxpayers and officials through greater use of information technology in tax administration.

Rizwan Rahman, former president of Dhaka Chamber of Commerce and Industry, said, "On 30 November, the finance adviser hinted at this matter, and hopefully it will be a positive step toward creating a taxpayer-friendly environment."

However, he raised concerns about the effectiveness of policies if developed solely by NBR officials even in a separate department.  

Rahman proposed that the new entity should be an independent department under the Ministry of Finance, separate from the Internal Resources Division (IRD), and led by the Finance Secretary. There must be a balancing of public and private sector participation. 

"NBR representatives could contribute as technical experts," he added.  

Rahman further suggested that each committee within the department should be co-chaired by representatives from both private and public sectors. 

He recommended that policy development be based on public-private dialogue, with the Federation of Bangladesh Chambers of Commerce & Industry (FBCCI) and professional accounting associations leading the discussions.

M Masrur Reaz, founder and CEO of Policy Exchange Bangladesh, called the proposed separation a "positive step toward promoting transparency and good practices in revenue administration." 

He noted that while Bangladesh has the institutional capacity through the IRD and NBR, these entities have been run under a single leadership. 

Reaz suggested separating their leadership to improve efficiency and ensure objectivity in policy formulation, tax rates, and enforcement, ultimately reducing taxpayer harassment.  

He also recommended bringing in external experts with experience in trade facilitation to ensure neutrality in policymaking and incorporating professionals from outside the tax cadre, particularly in governance, policy, and regulation, to broaden and strengthen the tax policy framework.

What are in the proposals? 

NBR officials have proposed creating a dedicated division under the finance ministry to handle revenue policy formulation, alongside existing divisions such as the Finance Division, Economic Relations Division and Internal Resources Division. 

This new division would be led by a technical expert to ensure effective development of revenue policies and the annual budget, particularly concerning tax expenditures for upcoming fiscal years. 

Some NBR staff may be deputed to the division to assist in policy formulation and research, with the division potentially headed by a senior NBR official promoted to the rank of senior secretary.

A senior official in the Income Tax Policy Wing, speaking anonymously, explained, "Currently, the policy wing is focused solely on policy-making and is not involved in administration." 

He noted that even after separation, NBR officers would still have to carry out the tasks, meaning authority could just shift to officials from other departments. "Managing such a technical service with staff from different bureaucratic cadres, however, will present significant challenges."