Tax revenue is the backbone of the state. In a decisive move, the government recently announced that it would not abolish the National Board of Revenue (NBR) but would instead strengthen and elevate it to an independent, specialized department. This decision is a highly positive and forward-looking step for Bangladesh’s economic future. But why is this decision so crucial? What should genuine tax reform look like? Let’s explore the issue in depth, considering history, global practices, and ground realities.
Lessons from History: Why the ‘Board Model’ is Superior
Our revenue system has its roots in the British era. The British entrusted the complex task of revenue policy and implementation not to a single individual or office, but to a ‘Board’ or Committee. The reason was simple: the collective wisdom, experience, and balanced deliberation (Collegial Decision Making) of multiple experts make complex decisions more effective and equitable.
The world’s oldest revenue boards were born on British soil: the Board of Customs (1643), the Board of Inland Revenue (1849). This same model was applied in the Indian subcontinent, which later evolved into the Central Board of Revenue (CBR) and ultimately, in independent Bangladesh, the National Board of Revenue (NBR).
Even today, one of the world’s best revenue administrations, the United Kingdom’s HMRC (Her Majesty’s Revenue and Customs), operates on this board model. It is not a ministry; it is an independent, non-ministerial public body. It is run by an executive committee and an advisory board, ensuring its efficiency, transparency, and impartiality.
Why Must a Revenue Authority Be Independent and Apolitical?
This is a fundamental question. The revenue authority holds citizens’ confidential information—income, assets, bank accounts, and more. It possesses extensive powers of search, seizure, and enforcement.
In a democratic system, if this agency were under the direct control of a political minister, the potential for a conflict of interest would always exist. There could be risks of bias towards ruling party supporters or harassment of political opponents, threatening citizens’ fundamental rights and data security.
This is why in almost all developed countries, revenue and major enforcement agencies (like the FBI, CBI) operate under independent, apolitical, and professional chief executives. Transparency International Bangladesh (TIB) and other civil society actors had also argued strongly for preserving NBR’s independent existence.
Structural Complexity: The Silos of the Civil Service
Bangladesh’s civil service cadre system is a series of ‘closed compartments’. An officer from one cadre typically cannot move to a position in another. Had NBR been transformed into a department under the Finance Ministry, the revenue headquarters would have shifted to the Secretariat. There, almost no positions are reserved for the specialized officers of the Tax and Customs cadres.
This would have been a colossal waste for revenue administration. Specialized work requires specialized people. Dismantling NBR’s structure would have made it impossible to utilize the reservoir of expert knowledge and skills built up over decades. This is another strong reason why strengthening NBR in its current form is the logical path.
Policy and Implementation: The Need for a Dynamic Synergy
Another critical aspect of tax reform is creating an effective and dynamic synergy between Policy Formulation and Implementation.
- Policy Formulation determines tax rates, return forms, audit methods, and enforcement rules.
- The Implementation Team are the foot soldiers who interact directly with taxpayers and understand the real-world challenges of policies firsthand.
As per NBR’s own proposals, the core of revenue policy formulation should involve experienced personnel from the Customs and Tax services, while also maintaining functional independence. To make policy research and innovation-driven—rather than bureaucratic—and to incorporate advice from various stakeholders (economists, business leaders, professionals), a robust Advisory Committee could be formed. This would make policies more practical and dynamic.
Current Challenges and Immense Potential
The challenges in our revenue mobilization are clear. Considering the country’s nominal GDP growth and inflation rate, revenue growth should ideally be around 16-17%. In reality, it is much lower. For July-May of the 2023-24 fiscal year, revenue growth was only 4.21% (source: media reports). Meanwhile, in South Asia, Pakistan’s同期 revenue grew by 26%, and India’s by 17%.
Some fundamental issues are at play here:
- Lack of a Full-Time Chief Executive: For nearly 45 years, NBR has operated without a full-time Chairman (CEO). The Internal Resources Division Secretary holds the position as an additional charge—an internationally unusual practice.
- Slow Pace of Digital Transformation: In the age of the digital economy, the capacity to track online and mobile transactions remains limited.
- Insufficient Investment in Capacity Building: There is a need for greater investment in training officers on modern global tax concepts, data analytics, and in upgrading logistical infrastructure.
The hopeful news is that over 80% of NBR’s officers are young and enthusiastic. They possess a strong drive to build a modern, digital, transparent, and citizen-centric revenue system. The government’s decision has unlocked that very potential.
Conclusion: Moving Forward with Reform
The ancient Indian economist Kautilya said, “Kosha Moolo Dandah” – the treasury is the root of state power. A strong, efficient, and transparent revenue system is indispensable for sustainable development, social security, and national sovereignty.
The government’s decision to strengthen NBR is the first crucial step in that direction. What is needed now:
- Appointment of a full-time, competent, and empowered Chairman.
- Strengthening the Board Model to ensure independent governance.
- Prioritizing and completing the Digital Transformation.
- Increasing expert and stakeholder engagement in policy formulation.
- Investing in capacity building for officers.
Tax reform is not an overnight task. It is an ongoing process. Let our collective goal be to move towards modernization while preserving NBR’s stability and independence. A robust revenue system alone can lay the foundation for the prosperous, developed Bangladesh we aspire to build.