Will splitting NBR trigger revenue boost or bureaucratic power play?

The National Board of Revenue (NBR) is poised for a major structural overhaul, with plans under way to split the agency into two separate divisions in a bid to enhance revenue collection and attract investment.

The reform would mark the first major revamp of the five-decade-old institution, which currently serves as the top revenue authority in Bangladesh.

But the move has sparked debate over whether this division — into Revenue Policy and Revenue Administration — will align with international best practices or merely lead to bureaucratic reshuffling without real impact.

Some believe the split could help address long-standing complaints from the business community and bring greater efficiency.

Others argue it may simply open the door to more promotions and internal power consolidation.

Discussions also revolve around who will lead the Revenue Policy division, how inter-cadre disputes will be resolved, and the management of crucial data in case of contract-based recruitment.

Some insiders worry that, like past promises, the initiative could remain confined to documents while others hope it will mark a rare instance of words being turned into action.

Reform of the revenue administration entered discussion in the 1990s.

In recent years, business leaders, macroeconomic analysts and international development partners have pushed for the government to move away from the current model of the NBR.

Citing the chief advisor, NBR Chairman Md Abdur Rahman Khan said an ordinance will be issued to restructure the organisation

“It will take effect from July, and we will operationalise it as soon as possible,” he added. “We are moving in that direction.

“The initial work must begin, and any disputes that arise will be addressed later.”

When asked if the ordinance would be delayed, the NBR chief told bdnews24.com on Monday: "It may take a little more time. Our work is in progress."

Former World Bank chief economist for Bangladesh Zahid Hussain argued that the move should not be seen simply as splitting the NBR, but rather as structurally separating policy from administration under the finance ministry.

He explained that simply setting up a separate unit for revenue policy within NBR would not be effective.

Zahid said, “Establishing NBR solely as a tax administration body, responsible only for implementing tax policies, is essential.

“Policy formulation shouldn’t be its role. If the policy unit remains under the NBR chairman, the entire concept fails.”

Following the change in government on Aug 5, 2024, the interim government has taken initiatives to reform multiple institutions and systems.

As part of this, the Internal Resources Division (IRD) formed a five-strong advisory committee for NBR reform.

The committee, which includes former NBR chairmen from the administration cadre and former members of the customs and income tax cadres, submitted an interim report in December, recommending the separation of revenue policy and management into distinct departments.

The proposal aims to ensure transparent, development-friendly policies and improved revenue collection.

The panel also highlighted the need to revise the 1972 President’s Order to restructure NBR and IRD.

The advisory council has reportedly approved the proposal in principle.

PROGRESS ON THE ORDINANCE

The advisory committee was formed on Oct 9, 2024, under the leadership of former NBR Chairman Mohammad Abdul Mazid.

It also includes former chairman Nasiruddin Ahmed, former members (Tax) Md Delwar Hossain and Aminur Rahman, and former member (Customs) Farid Uddin as members.

The committee's report submitted to the finance advisor highlights the rationale for separating the revenue administration and policy departments.

It says combining tax policy formulation and implementation within the same organisation has led to accusations of compromise, corruption, irregularities, and conflicts of interest.

The report points out that due to the responsibility of both policy-making and management being handled by the same body, the organisation has less time for policy development, resulting in insufficient revenue collection and a lack of effective institutional capacity-building initiatives.

It highlights that the current structure, with the secretary of the Internal Resources Division serving as NBR chairman, “hampers the proper delivery of tax policy, collection, and taxpayer services”.

Following the recommendation to divide the NBR, the panel has outlined potential roles for the new officials and the division of duties.

A draft ordinance has been prepared after reviewing the legal framework for separating the policy and management divisions, with 25–30 officials from the income tax and customs divisions involved in the process.

HOW NBR IS BEING SPLIT

Currently, the NBR operates under the IRD of the finance ministry.

The Directorate of National Savings, Customs Excise and VAT Appellate Tribunal, and the Taxes Appellate Tribunal are also under the IRD's jurisdiction.

The secretary or senior secretary of the IRD automatically assumes leadership of these four departments.

To separate revenue policy and revenue management activities, it is necessary to issue an ordinance that will repeal the existing National Revenue Board Order, 1972.

If the ordinance is approved by the advisory council, the creation of the policy and management divisions will necessitate revisions to the Rules of Business (including the allocation of business), amendments to the cadre rules of both cadres and the formulation of the organisational structure for the two divisions.

The draft ordinance indicates that both divisions will function under the finance ministry.

The secretaries of these divisions will be officials with a minimum of 20 years of experience in the Income Tax and Customs cadres.

These top officials from both cadres will alternate in leading the divisions.

Under the new structure, the Revenue Administration division will be responsible for collecting taxes through the enforcement of laws and regulations related to income tax, travel tax, donation tax, wealth tax, customs duties, Value Added Tax (VAT), supplementary duties, excise duties, and surcharges.

It will also handle international trade and customs agreement negotiations, finalisation, and opinions; international double taxation avoidance agreements; transfers and postings of Income Tax and Customs cadre officials; enhancing revenue management efficiency, effectiveness, dynamism, transparency, and accountability.

The Income Tax Appellate Tribunal and the Customs, Excise and VAT Appellate Tribunal Office will be under its administrative control.

Conversely, the Revenue Policy division's primary function will be to formulate, amend, and interpret laws and regulations related to income tax, travel tax, donation tax, wealth tax, customs duties, VAT, supplementary duties, excise duties, surcharges, and other customs and tax-related legislation.

This division will also handle tax imposition and exemptions, other activities as per the Rules of Business, and any other responsibilities assigned by the government.

An advisory committee, comprising economists, revenue experts, business and professional representatives, and representatives from relevant ministries, departments, and stakeholders, will be formed to advise the Revenue Policy division on policy formulation.

The Revenue Policy division will determine the committee's terms of reference.

WHY SEPARATION IS NECESSARY

Business leaders argue that the existing tax laws are not investment-friendly while both former and current NBR officials admit that policy formulation has been neglected due to an overwhelming focus on revenue collection.

This neglect, they say, is stalling investment.

The NBR chief said, “We have always faced immense pressure to meet revenue targets, relying heavily on policy measures. This has caused significant losses to the state.

“Inconsistency in investment policies is a major issue, discouraging many investors. We lack good governance. There are many laws, but enforcement is weak. The rule of law is almost absent.

“It is not just about a small tax net or low tax collection—it is about systemic governance failures,” he added.

Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), claims that the current structure allows for ambiguity in policy formulation, which he believes is intentional.

He said: “They keep things vague on purpose. That way they can misinterpret laws as needed — to catch people or to benefit personally.

“They never clarify these areas, and that’s where we face difficulties.”

The business leader described the current tax laws as "anti-investment”.

“The taxation system we have is, frankly, unjust and unlawful. Some of these inconsistent laws seem to be crafted solely to facilitate looting of tax revenue,” he told bdnews24.com.

Former NBR member Farid Uddin outlined three reasons for separating revenue policy.

First, he said, many policies on customs, VAT, and income tax deviate from global best practices and require reform due to embedded irregularities.

Second, the alignment of tax policy with the country’s overall development goals is difficult to assess if the NBR remains solely responsible.

He argued that while the board focuses mainly on revenue collection, policies should also encourage investment and support consumers.

Third, he cited allegations that some NBR officials collude with specific groups, failing to implement necessary measures and instead opting for compromises.

WHO WILL BE INVOLVED, WHAT QUALIFICATIONS WILL THE CHIEF NEED?

NBR chief outlined the personnel for the two proposed divisions.

He indicated that external specialists, particularly from economics, commerce, and research, would be included.

He, however, suggested that officials from the NBR's income tax and customs cadres would primarily undertake the core tasks.

"Those with experience in revenue administration will do the core work while others will act as auxiliary support. This will let us implement the law objectively and with more focus," said Rahman.

Former NBR member Fraid said, “We have said that the policy will go to a separate place under the finance ministry, whether it’s within the IRD or elsewhere.”

According to him, since this is a technical job, merely appointing competent administrators won’t suffice—professionals from within the tax cadres are essential.

"You can't have a philosopher do an engineer's job," he said, arguing that only those familiar with the structure and function of NBR can develop effective policy.

Farid also recommended the establishment of an advisory committee to ensure that the revenue policies align with the government’s overall development goals and international best practices.

This committee would include prominent national economists, knowledgeable business leaders, representatives from the Tariff Commission, the Ministries of Industry and Commerce, the Bangladesh Institute of Development Studies (BIDS), the Ministry of Finance, civil society representatives, consumer rights organisations like the Consumer Association of Bangladesh (CAB), and the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).

Although a proposal on the chief’s qualifications is included in the draft ordinance, the advisory panel insists on codifying the criteria in detailed policy guidelines.

Drawing from international practice—like Australia’s model—the former NBR member said the selection should follow a transparent process.

There, only candidates with clearly defined skills and experience in tax policy can apply.

A technical committee shortlists four or five candidates, and the final interview is taken by the prime minister and opposition leader before an appointment is made.

He added, “We’ve proposed something along these lines. It’s the most transparent system.

“NBR officers posted to the policy division will receive ranks equivalent to secretariat positions. These positions won’t be permanent, reducing the chance of corruption.

“Instead, these officers will support implementation, while key decisions will be made collectively with the advisory body.”

Concerning revenue management or the NBR itself, he said the chairman would be appointed based on specific policy guidelines.

The advisory committee proposed that anyone qualified, skilled, and honest, with an understanding of business concerns and the ability to coordinate efforts to improve the country's investment climate, increase revenue, and reduce harassment and corruption, could become chairman, even if they are a junior member.

When asked whether policy formulation would take longer under this system, Farid brushed off the concern.

“Why would it? It’s a matter of three minutes,” he said.

He also emphasised the need for a robust research unit linked to a university that conducts year-round studies on tax policy.

This would eliminate the last-minute rush in June, as policy development would be continuous.

He said policy distortions to meet revenue targets must be stopped. Targets would no longer be dictated top-down but decided by the policy division.

If the revenue policy wing is given full departmental status, there would be no legal conflict, he said.

“What breach? Is it the Constitution? The Constitution itself is being amended, and you're talking about laws. Rules of Business aren’t laws. What’s being proposed is simply procedural reform,” he added.

WHAT ARE BUSINESSMEN AND ANALYSTS SAYING?

Economist Zahid underscored the need for clear lines of accountability in the effort to separate the revenue policy department from the NBR.

“Their accountability needs to be clarified,” he said.

“If they are accountable to the NBR, then there is no separation. So, a completely separate department needs to be created here. It will be under the finance ministry. Not under the NBR.”

He emphasised that the structural details of the new entity would follow once its independence was ensured.

“Then they will decide what kind of people will be in which positions, whether there will be an advisory committee, whether there will be an opportunity for outsiders to participate—these are matters of detailing,” he said.

“If we cannot do it properly there, if there is no real separation, if it works as another department of the NBR, then how can policy and administration be separated?” he asked.

Addressing concerns over appointments from the administrative cadre, Zahid noted that the selection process should be driven by merit.

“If there are qualified, skilled people, they will have no difficulty in getting appointments there,” he said.

Stressing the importance of well-defined selection criteria, he argued that eligibility should not be limited to a single group.

“Anyone who qualifies there, be it customs or administration, will be able to enter,” he said.

Business leaders and tax consultants have long advocated for a strict separation between those who craft tax policy and those who enforce it.

BKMEA President Mohammad Hatem said, “We have always said that those who will formulate the policy will not be in the implementation.”

“Then they will give the policy perfectly and solve the problems that may arise in all these places. There will be no ambiguity—that is the point,” he said.

Snehashish Barua, director of SMAC Advisory Services, said: “Among the tax administration officers, only those who have 10 years of experience in administrative work of tax collection should be transferred to the revenue policy branch.”

“And provisions should be made so that these officers do not return to the tax administration at the field level.”

He further advocated for a diverse and specialised team to shape tax policy.

“In addition, industry experts, chartered accountants, lawyers, economists and IT experts should be included in the contractual revenue policy department,” he said.

HOW WAS IT DISCUSSED?

In 1993, the International Monetary Fund (IMF) had urged the Bangladeshi government to separate the policy and administrative wings of the NBR, a request echoed years later by the World Bank.

The call for reform gained renewed momentum during the tenure of the military-backed caretaker government in 2007.

Former NBR member Farid recalled that a formal order had been issued to relocate the policy department from the NBR to the Internal Resources Division.

“That was a government order and still is,” he said.

“It has not been changed or cancelled.”

Explaining why the directive was never implemented, Farid said the proposed relocation to the Internal Resources Division was stymied by a shortage of office space.

A letter had been sent to the Ministry of Housing and Public Works to request a separate facility, but the ministry never responded.

The matter was left unresolved.

Although the Parliament approved a reform plan in 2009, the overhaul of the NBR was never carried out.

Reflecting on the failure, Farid pointed to the broader political and institutional leadership.

“Who was responsible for the reform?” he asked.

“Didn’t those who were later chairmen, ministers, and governments have the responsibility? So can we blame the people of the NBR?”

“I can openly challenge anyone in front of the nation and say, those who were responsible did not do it,” he declared.

WHERE ARE THE COMPLICATIONS?

Several stakeholders have expressed concern over the complications that could arise from separating the NBR.

Among the issues under discussion are whether the creation of an advisory committee might slow down the legislative process, whether sensitive information—such as budgetary details, customs and VAT policies—could fall into the hands of business interests if a large team is involved, and whether officials from the administration cadre might regain leadership roles if it is granted departmental status.

“A safeguard must be created for that,” said economist Zahid pointing to the need for clear protocols to protect confidentiality.

He emphasised the importance of formal agreements to prevent unauthorised disclosures.

“A procedure can be created and implemented,” he said.

“Then should everything be entrusted to one person? That could be a debate.”

Speaking about the possibility of information being leaked, Zahid alluded to a recent incident in which details of the national budget appeared to have leaked before its official release.

“The budget speech is not supposed to be published anywhere in advance,” he said.

“But it seems that it has been leaked to the media two days ago.”

He continued, “Who you share what kind of information with should depend on who needs to know what. Don’t share information that someone doesn't need to know.”

“You have to trust me with the information I need to know for my work.”

When asked whether there would be friction between bureaucrats and advisory committees, Zahid noted that the proposed structure would include a permanent division.

“The advisory committee will have a role in changing or determining any policy at the top level,” he said.

“But there will be no need to go to them for day-to-day decisions.”

Lawyer Snehashish Barua said, “The industry expert panel should have a terms of reference (TOR),” he said.

“A clause regarding confidentiality should be included in that TOR.”

Ex-NBR chairman Nasiruddin Ahmed made it clear that their proposal excludes the administration cadre from future roles within the revenue department.

“Only officials from the customs, VAT and income tax cadres will come here,” he said.

“Officials from the administration cadre will not be able to come.”

He dismissed past practices as irrelevant.

“What happened before or not is irrelevant. If something is done after that, the government will do it, we have nothing to do,” he said.

“This will reduce a lot of distortions, a lot of things. It will facilitate revenue collection.”

Asked whether policy-making would be delayed under the proposed reforms, Farid said: “Why will it be delayed? There is no reason for delay. It is a three-minute job.”

Farid, who is currently serving on the advisory committee, emphasised the need for a dedicated research wing affiliated with a university specialising in tax policy.

“The research wing will conduct research throughout the year,” he said.

He also noted that revenue targets would no longer be imposed from above.

“The NBR’s revenue targets will be set by the policy department,” he said.

“Policies cannot be distorted to collect revenue.”

Asked whether there would be a violation of the law if the policy branch of the NBR was given the status of a separate department, Farid said: “What will be the violation? Is this a constitution?”

“Rules of Business are not laws. And what will happen are general amendments.”

[Writing in English by Sheikh Fariha Bristy and Ruhshabah Tabassum Huda]