Revenue collection-target gap widensNBR’s tax exemptions swell to Tk54,000cr

The National Board of Revenue (NBR) has once again fallen short of its revised revenue target for the 2024-25 fiscal year, with economists pointing to extensive tax exemptions across multiple sectors as a major reason for the shortfall.

According to NBR data, total tax exemptions in FY25 amounted to around Tk54,000 crore – 10.48% higher than the previous year.

Economists say such “generosity” amid weak revenue performance has added further strain to the government’s already stressed treasury.

Internal disruption adds to woes

The revenue situation worsened in the final months of the fiscal year, particularly in May and June.

Traditionally, June sees a surge in collections, but this year that boost failed to materialise due to protests by NBR staff, especially in the Customs and VAT departments.

The revised revenue target for FY25 was Tk4,63,500 crore, while actual collections stood at Tk3,70,874.03 crore – a gap of Tk92,626 crore.

In FY24, collections totalled Tk3,62,797.10 crore, meaning year-on-year growth was just 2.23%. However, the overall shortfall from the revised target stood at nearly 20%.

Generous exemptions despite fiscal strain

Despite repeated promises to rationalise tax breaks, exemptions have not only continued but also expanded.

NBR officials confirmed that sectors including mobile phones, poultry, refrigerators and air conditioners, edible oil, textiles, and various government projects benefited significantly.

Tax exemptions in these areas reached Tk36,895 crore in FY25, compared with Tk35,712 crore the year before.

Economists caution that such a liberal approach, at a time when the national exchequer is already under stress, complicates fiscal management further.

An internal NBR study found that exemptions and reduced rates have depressed Bangladesh’s tax-to-GDP ratio by 2.28 percentage points.

As a result, the country continues to struggle to achieve a double-digit tax-to-GDP ratio – widely seen as essential for fiscal stability.

IMF conditions unmet

Bangladesh secured an IMF loan package that came with strict conditions, including curtailing tax exemptions to boost revenue.

While the government made limited efforts in some sectors, overall exemptions have not decreased. In fact, many have grown.

Dr Mustafa K Mujeri, former chief economist of Bangladesh Bank, said on Saturday that tax exemptions are a central reason behind the missed target.

“Tax exemptions are often justified as consumer relief. But in practice, the benefits usually go to importers, exporters, and large businesses, not consumers,” he said.

“We can’t eliminate tax exemptions entirely, but rationalisation is essential. This becomes even more urgent as Bangladesh prepares for LDC graduation," he added.

Dr Mustafa acknowledged that some exemptions may be justified in sectors that drive industrialisation and employment, but stressed the need for careful assessment of their actual impact.