Separation of revenue policy and enforcement this month, takes effect next FY: NBR chair

NBR Chairman Abdur Rahman Khan has announced that the separation of revenue policy and enforcement will take place this month through a presidential ordinance, with the change taking effect in the next fiscal year, starting in July, to ensure independent operations.

Speaking at a discussion, titled "Income Tax Act 2023: Reform Perspective", at the NBR headquarters in the capital's Agargaon today (12 March), he said, "Revenue-related expert officials will work as head of the two departments, while other experts will serve as part of an auxiliary team."

The BCS Taxation Association organised the programme, presided over by its President, Barrister Mutasim Billah Faruqui, with Secretary General Syed Mohidul Hasan also participating in the discussions. Income Tax Commissioner Iqtiaruddin Mamun presented the keynote paper.

In his speech, the NBR chairman also addressed Bangladesh's low investment levels, attributing them not to high tax rates but rather to a lack of good governance.

"There was an assumption that offering tax incentives would attract investment, but that didn't happen. Businesses are not afraid of taxes. The main reason behind the lack of investment growth is the lack of good governance," he said.

He further emphasised, "Even if we offer zero taxes and provide incentives, foreign direct investment [FDI] will not come unless good governance is ensured. The rule of law is absent here."

 He also held an inconsistent tax policy responsible for a lack of confidence on the part of investors. 

Abdur Rahman Khan also pointed to the disproportionate burden of indirect taxes, saying, "Still, the poor contribute two-thirds of the total revenue through indirect taxation." 

Why separation of policy and enforcement?  

Currently, the revenue authority is responsible for both formulating revenue-related policies and enforcing them at the field level. This dual role has led to operational challenges, prompting business leaders and taxpayers to be unhappy. Economists have long been advocating for a separation of policy-making and administration.

The interim government has taken the issue seriously and formed a committee on revenue reform. The committee submitted a proposal recommending the separation of revenue policy and enforcement last December.

However, reports that the revenue policy may be handed over to officials from the administration cadre have caused concern among NBR officials. 

Many have come together to ensure that while policy and enforcement are separated, both remain under the control of NBR officials.

There was also speculation that the NBR chairman himself supports revenue policy responsibilities to be handled by the administration cadre rather than by revenue officials. 

Since the chairman's position has long been held by an official from the administration cadre, this has led to suspicion and mistrust among NBR officials regarding his stance on the issue.