Why a well-intended NBR reform turned into a stand-off

If the police were asked to write the law on when they can open fire, they would do so in a way that maximises their own power – bypassing the need for a magistrate's approval and avoiding judicial oversight. That, Muhammad Abdul Mazid argues, is simply human nature within bureaucracy. And that, he says, is precisely what has happened with the National Board of Revenue (NBR).

Mazid, former NBR chairman and currently heads the revenue reform commission, paints a stark picture. 

Take a taxpayer who has gone abroad four times in a year. An income tax official may simply declare those trips as unnecessary expenses – refusing to accept them as allowable deductions. "And he will do it not out of reason but out of power – aggressively, even vindictively," Mazid says. "For every Tk5 that goes into revenue collection, Tk12 disappears into unofficial hands, thanks to this discretionary power."

This discretionary muscle isn't just in income tax.

Md Farid Uddin, a former NBR member with decades of experience in Customs and VAT, shares another case: an importer brings in raw materials at $10 per kg. But the customs official digs up a five-year-old database showing the price was once $20 – and assesses duty at that outdated rate. 

"Their job is to verify declared values against reality, not to impose wishful taxation," Farid says. "Our tax policy is full of distortions and falls short of international standards. That's why separating policy from management is essential."

Our tax policy is full of distortions and falls short of international standards. That's why separating policy from management is essential.

Md Farid Uddin, former NBR member

These are not isolated anecdotes. They expose a deeper flaw in the architecture of Bangladesh's tax system: the policy-maker is also the enforcer.

Colonial legacy no longer fit

The problem, rooted in a colonial-era model, is that the same officials who draft the rules also wield the stick. This made sense when the country's economy was small and aid-dependent. But as Bangladesh now funds over 80% of its budget through domestic revenue, and businesses grow more complex, that old model is showing its cracks.

The World Bank has been quietly pushing for a separation of NBR's policy and enforcement wings for over two decades. The IMF has been more vocal lately, especially after its $4.7 billion loan deal with Bangladesh made tax reform a central pillar.

Interestingly, even NBR's rank and file seem to see the writing on the wall.

In January this year, the interim government presented a draft framework to divide NBR's functions. In a hastily convened meeting on 21 January, both the BCS (Taxation) and BCS (Customs and VAT) associations agreed in principle to cooperate, pledging to devise a roadmap that wouldn't hurt revenue mobilisation.

Also, the private sector and economists were cheering when the government decided to split the NBR.

At that time, BKMEA President Mohammad Hatem welcomed the proposed separation, saying it would help businesses immensely and reduce harassment. 

Formulating revenue laws is a technical task. The commission's leadership should come from a broader background – someone who understands economics, law, and governance.

Masrur Reaz, chairman, Policy Exchange Bangladesh

Abul Kasem Khan, former president of the Dhaka Chamber of Commerce and Industry, called the reform a reflection of the government's will to modernise. "If implemented, it will ensure greater accountability. Separation of appellate tribunals from NBR will deliver fairer tax justice."

Md Shahriar, president of the Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association, underscored the need for independence: "Those who draft laws should not enforce them. NBR's appellate tribunals should work like the judiciary, ensuring justice for taxpayers."

Policy Exchange Bangladesh Chairman Masrur Reaz agrees – but with a caveat. "Formulating revenue laws is a technical task," he said. "The commission's leadership should come from a broader background – someone who understands economics, law, and governance."

Why NBR officers fighting back

After taking office last August, the interim government moved to reform the revenue administration. A reform committee it formed, along with the White Paper Committee on the economy, recommended a structural overhaul – most notably, the separation of policy-making and enforcement functions within the NBR. The intent seemed clear: modernise the tax administration by reducing conflicts of interest and increasing efficiency. 

But what followed has led to frustration, resistance, and a near shutdown of trade.

On 12 May, the government issued an ordinance abolishing the NBR and establishing two new entities – the Revenue Policy Division and the Revenue Management Division. However, the NBR reform committee had advised appointing NBR insiders as heads of the new divisions, the ordinance left this vague. It stated that the Revenue Policy Division would be led by "an officer the government deems suitable," and that preference would be given to NBR officials for the management wing.

To many NBR officers, this was vague.

They argue the language is intentionally ambiguous, leaving room for the influential administration cadre to assume control of both divisions – something they say has happened time and again in the past. Though Bangladesh has 26 civil service cadres, the administration cadre has historically dominated key policymaking positions, including the NBR chairmanship for decades.

The real trouble began when NBR officers felt sidelined from the separation process. They allege the current NBR chairman and the finance adviser shaped the ordinance to favour administration cadre interests. 

In protest, NBR officials launched a pen-down movement on 14 May, later warning of disruptions to import-export operations. The government initially softened its stance, with the finance ministry declaring on 25 May that the NBR would instead be elevated to a specialised division under its oversight.

Their fears were compounded when no one from their protest platform – the NBR Reform Unity Council – was included in the committee formed to amend the ordinance. Meanwhile, two known supporters of the original ordinance were included and reportedly advised the chairman on decisions.

Rising tensions, missed opportunities

Yet on 25 June, in an interview, the finance adviser reasserted the original plan – abolishing the NBR and splitting its functions – reigniting tensions.

Several developments after Eid further escalated the unrest. 

Officers were denied a venue for a seminar titled "What kind of NBR do we want?"; six protest leaders were abruptly transferred; and the finance adviser did not formally invite any protest-linked officials to the 26 June meeting. 

One protesting officer said, "Room allocation was only approved after the pen-down was announced – too late to step back."

However, the NBR chairman claimed that the protesting officials were not prevented from being provided rooms; rather, rooms were allocated for their meetings, but they refused to use them.

Regarding the sudden transfer of protest leaders, a senior NBR official, speaking anonymously to TBS, said the government holds full authority to transfer officials at its discretion – a power exercised by the chairman.

Despite no consensus in the 26 June meeting, the ministry issued a press release claiming the protest was withdrawn. The adviser then scheduled the next meeting for 1 July, stating he had no earlier availability – even as port operations ground to a halt, causing an estimated Tk 2,500 crore in daily trade disruptions.

Business leaders sound alarm

This indifference drew criticism from business leaders. 

BGMEA President Mahmud Hasan Khan Babu urged a resolution through dialogue by Saturday. Syed Nasim Manzur, president of the Leather and Footwear Manufacturers and Exporters Association, warned, "The global market won't wait for Bangladesh. Customs services don't shut down in other countries – except during war."

He added, "Reform is essential, but so is clarity on the future of NBR officers. Many honest officials deserve answers."

Mahbubur Rahman, president of the International Chamber of Commerce, Bangladesh, pointed to a broader concern: "Public-private dialogue is nearly absent under the interim government." He urged officials to avoid "suicidal decisions" that damage trade.