NBR, IRD dissolved: One agency to impose taxes, others to collect

A major reform is happening at the customs and tax administration with initiative being taken to create two separate revenue policy and revenue management departments by dissolving National Board of Revenue (NBR) and Internal Resources Department (IRD). An ordinance was issued on this matter on Monday night.

According to the Revenue Policy and Revenue Management 2025, the revenue policy department will determine taxes and duties and the revenue management department will collect those, and both departments will work under the finance ministry.

Meanwhile, dissatisfaction grew among the officials and employees of the customs, VAT, and income tax departments over the government’s initiative to dissolve the NBR. The NBR Sangskar Okya Parishad (NBR Reform Unity Council), a platform of customs and tax officials and employees, on Tuesday announced a three-to five-hour pen-down programme for the next three working days (Wednesday, Thursday, and Sunday).

Economists, however, welcomed this major reform initiative in the revenue sector. They think this reform will modernise tax administration, increase revenue, and make management more efficient.

Former NBR officials opined this reform might increase the dominance of the administration cadre in the revenue sector and curtail the opportunities of the customs and tax officials.

Until now, NBR had simultaneously been formulating revenue policy and collecting customs and taxes. However, businesspeople and economists have long saying that complexities mar the tax system because of performing both responsibilities of tax policy formulation and tax collection by the same agency. Businesses and taxpayers were facing various forms of harassments. So, businesspeople and economists have long been demanding the separation of revenue policy and revenue collection activities.

After the interim government took office, a five-member advisory committee led by former NBR chairman Mohammad Abdul Majid was formed in October 2024 to reform the revenue sector.

The committee submitted an interim report in January this year and recommended creating two departments – revenue policy and revenue management. The recommendation was approved in a meeting of the Advisory Council a couple of days ago.

The Ministry of Law, Justice, and Parliamentary Affairs issued the ‘Revenue Policy and Revenue Management Ordinance 2025’ on Monday night. The ordinance slightly changed the scope of work for the revenue policy department. The administrative positions in the revenue management department have been kept for officials from both the administration cadre, as well as the income tax and customs cadres.

The ordinance states that the revenue policy department will monitor the enforcement of tax laws and the state of tax collection, while the revenue management department will carry out the main task of revenue collection.

Speaking to journalists after a meeting of the Advisory Council Committee on Government Procurement on Tuesday, Finance Adviser Salehuddin Ahmed said the officials and employees of the NBR have nothing to worry about, even though two separate departments were formed. This decision was taken after consulting with senior NBR and administration officials, and it will have no impact on revenue collection.

Salehuddin Ahmed further said every country in the world have separate revenue policy and implementation departments. Those who formulate policies must be professionals and they should have knowledge of GDP, the economy, statistics, etc. it cannot happen that those who formulate policy will again collect revenue.

The ordinance also states the area of responsibility of the two new departments. It says the responsibility of the newly formed revenue policy department is to create an optimal tax system to collect necessary taxes for state operations by focusing on the overall economic development and following an expanded tax base, rational tax rates, and a limited tax exemption policy.

Besides, this department will be responsible for drafting or amending relevant laws, including the Stamp Act, and managing activities related to stamp duty, income tax, travel tax, donation tax, wealth tax, customs duties, value-added tax (VAT), excise duty, supplementary duty, surcharges, and other taxes, fees imposition, exemptions, and adjustments.

About the organogram, the ordinance states that various positions of the department will be filled with experienced people in fields such as income tax, VAT, customs, economics, business administration, research and statistics, administration, audit and accounts, and law. The government may appoint any qualified government official as the secretary of the revenue policy department, according to the ordinance.

Besides, an advisory committee composed of economists, tax experts, legal experts, audit and accounting experts, business associations, representatives of professional bodies, and ministries and departments concerned including Tariff Commission will be formed to advise this department regularly.

Tax and customs collection will be the main responsibility of the revenue management department. The ordinance states this division's responsibility will include proper enforcement of relevant laws and regulations; proper implementation of international agreements related to customs; proper implementation of international double taxation avoidance agreements; tax services in tax base expansion, enhanced outreach programs and bringing everyone under tax net; formulation of revenue management procedures; coordination with revenue policy department on revenue policy formulation and implementation; creation of skilled workforce; and conducting audit and intelligence operations.

Once the two departments are established, the existing workforce of the NBR will be assigned to the revenue administration departments. However, necessary personnel from this pool can be posted to the revenue policy department, according to the ordinance.

As the news of the ordinance dissolving the NBR and IRD and forming two new departments was out, dissatisfaction grew among officials and employees at the NBR headquarters in Agargaon, Dhaka from Tuesday morning. They fear their promotion and transfer might become limited. They held informal meetings throughout the day. Their various organisations had been raising objections about the dismantling of the NBR over the past couple of days.

On Tuesday afternoon, officials and employees staged a sit-in under the banner of the ‘NBR Reform Unity Council’, where a new protest program was announced. NBR officials and employees will go on a pen-down strike from 10:00 am to 1:00 pm on Wednesday, and from 10:00 am to 3:00 am on both Thursday and Saturday. All services will remain suspended during the strike except the services on international passenger, budget and exports, according to the officials.

NBR additional commissioner (customs department) Sadhan Kumar announced the programme on behalf of the Unity Council. He said, “We are gathered here to protest this ordinance. An ordinance suddenly issued without consulting stakeholders will not be acceptable.”

At the protest, joint commissioner Monalisa Shahreen Sushmita said opinions of officials and employees were not reflected in the process of issuing the ordinance. They had long been seeking an opportunity for discussion, yet the decision was taken unilaterally. People-friendly and participatory decisions are necessary to strengthen the economic foundation of the country.

Research organisation South Asian Network on Economic Modelling (SANEM) executive director Selim Raihan welcomed the government's initiative. He said this decision is bold and timely. This reform will modernise Bangladesh’s tax administration, increase revenue, and improve management efficiency. The affluent people, who do not pay taxes properly, must be brought under the tax net.

Former NBR member (tax policy) Syed Aminul Karim think the decision to dissolve the NBR sparked negative reactions among its officials. Now, those who will be appointed as secretaries of the two new divisions may come from the administrative cadre, and that path has now been opened. Whether secretaries will be appointed from the NBR remain uncertain. According to him, this decision should have been taken unanimously through after discussions with all relevant stakeholders.

The main objective to dissolve the NBR and IRD and form two distinct entities is to separate tax policy formulation from tax management. The goals also include improving efficiency, reducing conflicts of interest, and expanding the country's tax base. The Press Wing to the Chief Advisor of the interim government gave this explanation in statement on Tuesday.

Established over fifty years ago, the NBR has consistently failed to meet its revenue targets. The tax-to-GDP ratio in Bangladesh is approximately 7.4 per cent, one of the lowest in Asia. Restructuring the NBR is critical to increase tax-to-GDP ratio. There is growing consensus that a single institution should not be responsible for both creating tax policy and enforcing it—such an arrangement breeds conflicts of interest and promotes inefficiencies.