Govt turns to NBR as new pay scale adds Tk1.06 lakh crore annually

The National Board of Revenue has been asked to find ways to meet a sharply higher revenue target as the government seeks to finance the additional expenditure arising from the new pay scale for public servants.

Prime Minister's Economic and Planning Adviser Professor Rashed Al Mahmud Titumir gave the directive at a meeting with NBR officials yesterday (1 September), according to officials present at the meeting.

The NBR has a revenue collection target of Tk6.04 lakh crore set for FY27 – nearly 46% higher than the Tk4.15 lakh crore collected in FY26. Officials said achieving such growth would be challenging as Bangladesh has never recorded revenue growth of more than 27% since independence.

Illustration: TBS

The government has instructed that the additional funds needed for the new pay scale must come from NBR revenue collection. "The adviser told us to achieve the target at any cost," a senior NBR official told The Business Standard on condition of anonymity.

Another official said, "The salaries of government employees have been increased, and we have been told that the NBR has to provide the funds."

The government announced the new pay scale on Monday, which will directly benefit around 24 lakh government employees and nine lakh pensioners. Full implementation is expected to cost the government an additional Tk1,05,580 crore annually.

NBR officials said the target would be difficult to achieve amid sluggish economic activity, production disruptions caused by gas and power shortages and declining imports, particularly of goods that generate higher import tax.

Revenue collection has already shown signs of weakness in the new fiscal year. Although September has begun, the NBR has yet to officially publish its July collection figures.

Requesting anonymity, an NBR official said VAT collection stood at Tk9,301 crore in July, down from Tk11,547 crore in the same month last year. Preliminary figures show Vat collection fell further to Tk8,362 crore in August, compared with Tk11,081 crore a year earlier.

Import tax collection has also declined year-on-year, officials said, without providing figures. 

Repeated attempts to contact Adviser Titumir for comment were unsuccessful.

Experts also said the revenue target was unrealistic under the current economic conditions. 

Fahmida Khatun, distinguished fellow at the Centre for Policy Dialogue (CPD), told TBS that the NBR's structural weaknesses and the prevailing economic environment would make the target difficult to achieve.

"The NBR has a capacity gap due to its structural weaknesses, while the current economic reality is not conducive to achieving the target. As a result, meeting the revenue target will be very difficult," she said.

She said the NBR had seen little meaningful reform, while the skills of its officials had not improved significantly. At the same time, effective measures had not been taken to expand the tax base, she added.

"The current government inherited an economy in poor condition. Inflation is high, business costs are elevated, investment is low, industries are contracting, and there is a fresh energy crisis. Imports have also declined. Naturally, VAT and tax collection cannot gain momentum when businesses are not doing well," Fahmida said.