National Board of Revenue

National Board of Revenue (NBR) is the apex body for the revenue collection and management on behalf of the government's Ministry of Finance. The revenue collected by the National Board of Revenue is the principal source of domestic resources for the implementation of the national budget. It is also the catalyst for scheming, planning and monitoring in achieving economic self-reliance. It wields influence on industrialization, trade and commerce and investment climate of the country. The roles, jurisdiction and main functions of the board of revenue include: (1) imposition, examination, monitoring and collection of direct and indirect taxes; (2) formulation of laws, rules, regulations on collection of direct and indirect taxes, and providing clarifications and explanations regarding their application; (3) monitoring and controlling the activities of organizations engaged in collecting import and export duties, value added tax, supplementary duties, excise and income taxes in a knowledge-based, just and customer-friendly environment; (4) providing assistance in the formulation process of tax policy and laws, signing of general cooperation agreements with international organizations and foreign countries, agreements on grants and loans and tax-related agreements; (5) fixing the jurisdiction and conditions for waiver and exemption of direct and indirect taxes; (6) voluntary expansion of the coverage of tax-payers and revenue collection through motivation campaigns, and conducting data collection and intelligence activities for proper fixation of taxes; (7) curbing tax evasion and smuggling, implementation of import-export policies, preservation and flourishing of domestic industries and formulating official policies with the goal of attracting foreign investments.

NBR Bhaban, Agargaon, Dhaka

The fiscal regime of Bangladesh consists of two broad categories of revenue: a) tax revenue, which is again divided into NBR tax and non-NBR tax, and b) non-tax revenue. It is governed by the National Board of Revenue (NBR). Revenue is also generated from non-NBR sectors and under the laws and acts of related ministries. The NBR taxes include Customs Duty, Value Added Tax (VAT), Supplementary Duty (SD), Personal Income Taxes (PIT) and Corporate Income Taxes (CIT). Personal and Corporate Income Tax, the single largest source of direct tax, is governed by the Income Tax Ordinance, 1984 (XXXVI of 1984).

Besides fiscal income from direct sources (e.g., income tax) Bangladesh generates a substantial share of its revenue from indirect sources through import and excise duties (customs duties). Customs duties are normally payable on the following goods: a) imported and exported goods; b) goods brought from any foreign country to any customs station and without payment of duties there, trans shipped or thence carried to and imported at any other customs station; and c) goods brought in from one customs station to another. The main legislation relating to customs and excise duties are: The Central Excises and Salt Act, 1944; The Central Excises and Salt Rules, 1944; The Protective Duties Act, 1950; The Customs Act, 1969; and The Customs Tariff Act, 1969/2000.

The customs duties were the biggest contributors to the tax revenue until the late 1980s, since when the share of customs duties started to decline largely because of reducing rates and levies in order to comply with the demands of globalized trade and the fiscal policies of market liberalization, and also, due to shifting of economy from trading to local manufacturing. It then became necessary to think of other options for revenue generation. Given the context, in 1986, the World Bank suggested to introduce VAT in Bangladesh. Factors that influenced the introduction of VAT were the complicacies and inefficiency in the implementation of the Sales Tax Ordinance 1982 and Business Turnover Tax Ordinance 1982. The VAT Act 1991 came into force on 1st of July 1991 replacing the Ordinances of Sales Tax and Business Turnover Tax. For the aim of greater revenue generation for the government and stimulating economic growth, the VAT Bill 1991 was proposed in the National Parliament on 1st June 1991 and a month later, the Bill was passed and made into the VAT Act 1991. The VAT Act 1991 contains over 70 laws that guide a business in VAT related issues, from registration to penalties on non-compliance. The new VAT Act promulgated in 2012 but became effective 2019. It dictated the structure of the VAT authority and the power it may exert on businesses regarding the three taxes within the realm of the Act as the situation demands.

It is evident that a narrow tax-base, widespread exemptions and administrative inefficiencies are the main factors behind the low tax-to-GDP ratio in Bangladesh compared to the neighboring countries. This also implies that the tax reforms of the last decades did not bring about significant changes in Bangladesh’s tax efficiency.

Bangladesh: Tax-GDP Ratio (Figures other than in column for Tax-GDP ratio are in Billion Taka)

FY	NBR Tax	Non NBR Tax	Total Tax Revenue	GDP	Tax-GDP ratio (%)
1972-73	1.6	0.1	1.7	50	3.4
1977-78	10.0	0.3	10.3	145	7.10
1982-83	20.2	1.3	21.6	294	7.34
1987-88	39.5	3.8	43.7	597	7.31
1992-93	86.4	4.6	91.0	1254	7.26
1997-98	138.0	15.9	153.9	2002	7.69
2002-03	237.5	12.0	249.5	3005	8.30
2006-07	374.8	17.7	392.5	4720	8.32
2007-08	474.6	20.4	495.0	5458	9.07
2008-09	525.3	25.3	550.6	7051	7.80
2017-18	2250	72	2322	22505	10.31
2018-19	2800	96	2896	25425	11.39
2019-20	3005	126	3131	27964	11.19

Source Bangladesh Economic Survey, Ministry of Finance.

Significant simplification and rationalization has been made in recent years to reform the taxation system. Tax assessments were made less complicated and an attempt of including more taxpayers into the tax net was made. The automation of tax collection was introduced along with increased rules for compliance with the standards and systems. The practice of honoring the taxpayers and recognizing their contribution received institutional shape in the NBR. In the case of legislative reforms, the new Value Added Tax and Supplementary Duty Act of 2012 were enacted and was made effective after almost seven years, in July 2019. A draft Direct Tax Code was posted on the government’s website and steps will be taking to Parliament for enactment. There are plans for a comprehensive/maximum reduction in the rate of Import and Supplementary Duty in the budget in subsequent years which will eventually shift the burden of revenue collection to Individual and Corporate Tax along with Value Added Tax (VAT).

The NBR was established in 1972 through the Presidential Order No 76 (The National Board of Revenue Order, 1972) after repealing the Central Revenue Board Act 1924 (Act No 4 of 1924). Later, amendments were made to the structure of the NBR through Act No 12 of 2009. The NBR is constituted with 1 chairman and 14 members, including 7 for direct tax, 6 for indirect tax, 1 for NBR Administration . The secretary of internal resources division is the ex-officio chairman of NBR. The status of members is equivalent to that of additional secretary. The total number of departments/directorates under the NBR is 82. Offices related to direct tax total 46; of these, those involved in collection of direct taxes Zone numbers 38. The remaining offices include 5 involved in the appeal process, 1 training academy, 1 engaged in inspection and 1 in survey work. The number of offices involved in collection of indirect taxes total 36. Of these, 30 are engaged in collection of indirect tax revenue. The remaining offices include 1 involved in the appeal process, 1 engaged in intelligence and investigation work, 1 in inspection, 1 in tax exemption and refund, 1 training institute and 1 engaged in valuation of commodities.

The offices under the customs wing of the NBR imposes duties on all import and export commodities of the country, applies relevant laws and regulations, determines processes, and monitors and implements those. Although collection of revenue is the main responsibility, these offices are also involved in trade liberalization and facilitation including application of various legal provisions. These activities are carried out through 11 customs houses, 1 bond Commissionerate, 1 customs-intelligence and investigation department, 1 duty valuation and internal inspection Commissionerate and 28 effective land customs stations at various places of the country. On the other hand, there are 2 departments, 8 VAT Commissionerate’s, and 40 departmental and 212 circle offices under the Value Added Tax (VAT) wing. The areas of work of the VAT wing include establishment of a modern, tax-payer friendly, accountable and dynamic revenue administration, enhancing revenue from domestic sources and playing an effective role in industrialization and expansion of trade and commerce. There are 18 tax regions, 5 appellate tax regions and 2 departments under the direct tax or income tax wing of NBR. There are a total of 303 circles under the 18 tax regions. The main responsibility of the income tax wing is to contribute towards maintaining social balance by reducing income disparity and extending assistance to industries and commerce by ensuring proper application of the income tax law.

Besides, the Central Intelligence Cell (CIC) works directly under the supervision of the chairman of NBR. It collects information about tax-payers through intelligence work; gathers information related to value added tax (VAT) and customs duties; undertakes data collection and investigation on evasion of duties and taxes; analyses records of income tax payers; identifies tax evasion, suppression of income and other crimes in accordance with the income tax law; undertakes investigation on tax evasion, suppression of income, any other irregularities and fraudulence related to income tax; gathers evidences-proofs, elicits fines and takes legal actions if required. The research and statistics wing of NBR collects information related to revenue income from the field offices and ensures their proper ordering, coordination and record keeping. [Muhammad Abdul Mazid]