NBR to propose reduced tax-GDP ratio to IMF for FY25

The National Board of Revenue (NBR) will propose a reduction in the tax-to-GDP ratio increase target to less than 0.5% for the current fiscal year during discussions with the visiting International Monetary Fund (IMF) delegation today (Thursday).

The adjustment comes in response to revenue collection shortfalls caused by disruptions during the mass uprising in July-August.

In the meeting, the NBR will also outline strategies to boost revenue collection for the remainder of the fiscal year.

“We will meet the IMF delegation to negotiate a reduction in the tax-to-GDP ratio increase target for this fiscal year. We aim to re-fix it below 0.5%, given the challenges we faced,” a senior NBR official told the Daily Sun on Wednesday.

The NBR faces a significant revenue deficit of approximately Tk31,000 crore in the first four months of FY2024-25, which officials admit is unlikely to be fully recovered by the end of the fiscal year.

As part of its loan agreement with the IMF, Bangladesh committed to increasing the tax-to-GDP ratio by 0.5% annually. However, the NBR is now considering to propose a reduction in this target to between 0.3% and 0.4%.

“The business environment has not yet normalised, and there was virtually no revenue collection during the first two months of this fiscal year,” an official said on condition of anonymity. “The IMF’s target of achieving an 8.10% tax-to-GDP ratio this year is unrealistic under the current circumstances.”

The NBR will meet with IMF representatives in two separate sessions today, involving first and second secretaries from the Customs, VAT and Tax wings. The discussions will focus on recalibrating the tax-to-GDP ratio and strategies to increase revenue collection amid ongoing economic challenges.

In a preliminary meeting held on Wednesday, IMF officials met NBR Chairman Md Abdur Rahman Khan and key members of the Income Tax, VAT and Customs wings.

The IMF has set a revenue target of Tk4,72,000 crore for FY2024-25, with an ambitious target of Tk5,67,200 crore for FY2025-26. However, the NBR argues that achieving these targets is not feasible without adjustments to the tax-GDP ratio growth rate.

Citing the current economic reality, NBR officials will propose relaxing the 0.5% annual tax-GDP growth requirement. “We will formally request the IMF to lower the target, allowing a more gradual increase in the tax-GDP ratio to align with the prevailing economic conditions,” an official said.

NBR officials said the ongoing meetings with the IMF are part of a series of follow-up discussions to assess Bangladesh’s compliance with loan conditions and review strategies to ensure fiscal stability.