Once again, the National Board of Revenue, the country's principal revenue collection authority, finds itself in a tight spot as it scrambles this time to satisfy the International Monetary Fund's conditions for Bangladesh to unlock the 4th tranche of a $4.7 billion loan program entered under the deposed Awami League regime in early 2023.

In a meeting held in Dhaka on April 7, the IMF essentially asked the NBR to collect some Tk 2 lakh crore in the last quarter of the ongoing fiscal to meet the conditions for release of the last two trenches of the $4.7 billion loan.

The IMF had earlier suspended disbursement of the fourth tranche of its $4.7 billion loan package to Bangladesh, citing non-compliance with key reform conditions, earlier in January. The decision reportedly followed a review of the country's macroeconomic indicators and structural performance benchmarks under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements.

The IMF raised concerns over Bangladesh's revenue mobilisation shortfalls, sluggish progress on energy sector reforms, and limited transparency in financial reporting. Finance Adviser Dr Salehuddin Ahmed, however, has expressed hope that the situation can be resolved through further negotiations.

The suspension poses a potential setback for Bangladesh's efforts to stabilise its foreign exchange reserves and control inflation. A senior NBR official said that the IMF has asked to increase the country's tax-GDP ratio to 7.9 percent by next June, from the current 7.4 percent.

That would require NBR to collect a massive Tk 4.55 lakh crore in revenue by the end of the current fiscal year (2024-25) - nearly 20 percent growth year-on-year. Revenue growth till February, the first 8 months of the current fiscal, stood at just 1.7 percent. Which means it is almost certain to fall well short of the target. Around Tk 2 lakh crore revenue will be required in the last 4 months of the running fiscal.

NBR officials have been quite candid about terming this as unrealistic and far too challenging.

In addition to the short-term target, the IMF has suggested increasing the tax-GDP ratio to 9 percent by the end of the next fiscal year (2025-26). It has recommended reducing the existing tax exemption (tax expenditure) and introducing a uniform VAT rate. The government however has maintained that VAT reform will only be implemented in phases. The IMF's latest review mission concluded on April 17.

The outcome of this mission will determine whether Bangladesh would get two installments at once as the fourth installment. As part of the review, during their visit, the team held meetings with Finance Advisor S Ahmed, Special Envoy to the Chief Adviser Lutfey Siddiqui, Bangladesh Bank Governor Dr Ahsan H Mansur Governor, Finance Secretary Md K Mozumder, Chairman of the National Board of Revenue (NBR) Md AR Khan, and other senior officials. The team also met with representatives from the private sector, think tanks, foreign donors, and international development partners.

Earlier in their latest forecast update, the IMF had slightly raised Bangladesh's GDP growth forecast for the current fiscal to 4 percent, from 3.8 percent in December. However, the government has been working with a growth target of 5.25 percent, in its revised budget.

The IMF further forecast growth to be 6.5 percent in the 2025-26 fiscal year, which is slightly lower than its previous forecast of 6.7 percent. It indicated some relief over the inflation figure. According to them, average inflation this year will be 9 percent, which is lower than its previous estimate. The government however, has set an inflation target of 8 percent, which is projected to further decline to 6.5 percent in the 2025-26 fiscal year.

Not so bright

The IMF mission team led by Chris Papageorgiou visited Dhaka during April 6-17 to discuss economic and financial policies in the context of the combined third and fourth review of the IMF's Extended Credit Facility, Extended Fund Facility, and Resilience and Sustainability Facility.

Papageorgiou said that negotiations are ongoing, with officials aiming to secure a staff-level agreement soon, potentially during the IMF-World Bank Spring Meetings in Washington. "This would facilitate the completion of the combined third and fourth program review. We reaffirm our commitment to support Bangladesh and its people at this challenging period," he added.

An IMF statement said the Bangladeshi economy continues to face multiple challenges amidst elevated global uncertainty. GDP growth fell to 3.3% (year-on-year) in the first half of FY25, down from 5.1% in the same period of FY24. The decline reflects disruptions from the popular uprising. A tighter policy mix, and heightened uncertainty also weighed on investment. After peaking at a decade-high of 11.7% in July 2024, headline inflation eased to 9.4% (y-o-y) in March 2025 but remains well above Bangladesh Bank's (BB's) target range of 5-6%, it said.

"To address the mounting external financing gap and ensure a continued decline in inflation, near-term policy tightening remains essential. Fiscal consolidation requires swift tax reform to eliminate preferential treatments and simplify the system. Properly calibrated monetary policy will anchor inflation expectations, while exchange rate flexibility will improve competitiveness, rebuild reserves, and strengthen economic resilience against external shocks," mission chief Papageorgiou said.

Papageorgiou emphasised that a comprehensive strategy to boost revenue and reform expenditures is crucial for supporting increased social spending and infrastructure investment. Bangladesh's persistently low tax-to-GDP ratio underscores the pressing need for tax reforms aimed at building a more equitable, transparent and streamlined system-one that ensures sustainable revenue growth, reduces widespread tax exemptions, improves compliance, and distinctly separates tax policy from administration.

He suggests that financial sector reforms must align with international standards, enabling orderly bank restructuring while protecting small depositors. Asset quality reviews and improved governance are vital for restoring confidence, while enhancing Bangladesh Bank's independence is crucial for stability.

He further added: "Sustaining the pace of structural reforms is crucial for tackling the country's economic challenges. Improving governance and increasing transparency will play a vital role in creating a more favorable investment environment, boosting foreign direct investment (FDI), and expanding export sectors beyond ready-made garments. Progress in AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism) risk assessments and enhancements in data quality are equally important."

He stated that climate resilience is essential for mitigating economic risks. The government should implement climate-responsive fiscal reforms and invest in sustainable infrastructure to safeguard financial stability.

The NBR's burden

Under a new chairman, the NBR has taken up a move to expand its Value Added Tax (VAT) base, with a view to increase revenue collection for the national exchequer.

In a meeting chaired by NBR chairman Md Abdur Rahman Khan earlier this month, the field level officials of Dhaka were asked to be more active and sincere for improving VAT collection keeping aside the stories of growth.

An official who was present in the meeting told our sister newsagency UNB that the NBR chairman mainly instructed them to expand the base of VAT - more sternly than ever before.

"I do not want to hear the word growth anymore, I want to see the expansion of VAT net," the NBR official quoted the NBR chairman as saying.

The NBR boss also asked the officials to change their mind set regarding revenue collection.

"You have to change your attitude, otherwise there is no need to be here anymore," he warned the officials who were present in the meeting, according to the official who spoke to UNB on condition of anonymity.

The NBR chairman also assured that the good performers will be awarded, although he expressed his depression regarding the poor performance of the VAT wing.

"We are unable to show any good performance till now in VAT collection, you have to conduct combing drives to find new VAT payers, you have to work as the whole nation is depending on the NBR," he told the meeting.

Abdur Rahman Khan, giving an example of people's eagerness to pay taxes during the 1/11 period, said that at that time people were very much enthusiastic to pay taxes.

"We have to handle the situation like that," he said. He also asked the officials not to harass the compliant VAT payers.

Also while holding a pre-budget meeting with the Economic Reporters' Forum (ERF), the NBR chairman had said that he had already instructed his VAT officials to conduct combing drives in a small area first to make all businesses in the area pay their VAT.

"No one will be left out from this drive, each and every shop owners will pay their applicable VAT, there will be no discrimination in this regard," he said, adding that the NBR is moving towards that direction.

The government on January 9 had issued the "Value Added Tax and Supplementary Duty (Amendment) Ordinance, 2025" and "The Excises and Salt Act (Amendment) Ordinance, 2025" imposing increased VAT rate on more than hundreds of different kinds of items aiming to strengthen the country's economic base.

Later, facing strong protest and criticism the NBR issued several notifications re-fixing the rates of VAT, Supplementary Duty and Excise Duty on a number goods and services, which were increased on January 9.

Now the NBR wants to impose a single, flat rate of VAT for all goods and services in the country, if the business people agree to that.

The NBR chairman has already said that the VAT system is currently mired in total indiscipline. He said that if input VAT credit and standard VAT rate can be imposed properly, then for many business entities the rate would be less than one percent.

He mentioned that for a long time the VAT Law has been distorted. In this connection he said that the new VAT Law was introduced in 2012 which was amended in 2019 after some major distortion. He also said that the power of VAT was accounting based and invoice based, it has been destroyed. As a result it is not growing right now, the main strength of VAT has been uprooted.

"We want to bring discipline in VAT," he said in the pre-budget meeting with the ERF.

Old habits die hard

It has also taken up a move to go after some 7.3 million, or 73 lakh Taxpayers Identification Number (TIN) holders who are not submitting their income tax returns. Currently, there are some 1,13,89,949 TIN holders in the country - of them only 40 lakhs submitted their income tax returns in the current fiscal.

"We are focusing on the issue, it is absolutely a discrimination towards the taxpayers who are paying their taxes regularly," a senior NBR official told UNB recently.

He said it is very unfortunate for a country with over 18 crore people, that only 1.13 crore are TIN holders and of that number only one third are submitting their income tax returns.

"We have instructed our field level officials to chase these non-compliant TIN holders, we have already started our work in the growth centres, our field level officials are working there," he said.

The NBR official said that the NBR has recently launched a new spot assessment programme to increase the tax net. Spot assessment is an effective step to provide direct services to all taxpayers who have taxable income and are obliged to file returns.

Various tax zones of the country have already started this programme, which is playing an important role in increasing tax awareness and building a tax paying culture among businessmen, professionals and the general public. Tax zones have actively started conducting spot assessments at district and upazila level of the country.

The NBR urged all business organisations, chambers of commerce, business leaders, local administrations, eminent persons and taxpayers of the country to provide their unwavering support and cooperation to make the ongoing spot assessment activity successful. The NBR believes that through the spot assessment activity, the tax payment tendency among taxpayers will increase and the tax system will be further strengthened.

Chairman Abdur Rahman has said that the non-compliant TIN holders will not be able to sleep peacefully without submitting their income tax returns.

"Officers will serve them notices to submit their returns," he told a pre-budget meeting.

The NBR believes that there is immense scope to widen the tax net of the country. To materialise the claim they have started the camp for the spot assessment for the convenience of the TIN holders.

The NBR chairman has said that if necessary the field level officials will even go to the trade bodies across the country to gather information about the potential taxpayers and TIN holders who took the number to meet some business requirement, but failed to pay their dues to the state.

"It is not a good practice to pressurise the taxpayers who are paying the taxes properly and regularly, and the non-compliant taxpayers will enjoy the systematic loopholes for all time, the time is over, this discrimination cannot run for a long time," he said.

Employing some of the language of the July Movement may have been clever manoeuvring by the NBR under its new chairman. Whether it can cure the country of one of its most persistent ills however, after efforts ranging from tax education to incentivisation to even some coercive measures for certain segments all failed, remains to be seen.