Separating Policy Revenue in NBR Top Reform Priority

The National Board of Revenue (NBR) has identified separating tax policy from revenue collection as its foremost reform priority. This proposed division aims to enhance efficiency, transparency, and fairness in tax administration. By streamlining operations and addressing systemic challenges, the NBR seeks to create a more effective framework that aligns with global best practices.

In its present structure, the NBR operates with dual responsibilities: formulating tax policies and ensuring revenue collection. While this centralized approach offers certain conveniences, it often leads to conflicts of interest, inefficiencies, and delayed decision-making. Policymakers face the dual burden of crafting tax strategies while also ensuring they meet revenue targets, creating a precarious balance between planning and execution.

Such overlapping roles often hinder the NBR’s ability to address broader economic goals. Tax reforms aimed at fostering economic growth may conflict with the immediate pressure to meet revenue collection benchmarks.

Separating tax policy formulation from revenue collection allows both functions to operate independently with distinct objectives:

Policy Focus on Economic Growth: A dedicated policy-making unit can concentrate on designing tax laws and regulations that support economic development, encourage investment, and address inequalities without being overshadowed by revenue pressures.

Efficiency in Revenue Collection: The revenue collection arm, freed from policy burdens, can focus on implementing policies, improving compliance, and reducing tax evasion.

Transparency and Accountability: Clear boundaries between policy creation and execution minimize potential conflicts of interest, fostering trust among taxpayers.

Alignment with Global Standards: Many countries, including those in the OECD, have successfully implemented this separation, demonstrating its viability and benefits.

Proposed Implementation Strategy

The NBR envisions a phased approach to this reform:

Establish a Tax Policy Unit (TPU): This unit, possibly housed under the Ministry of Finance, would take over policy formulation responsibilities. It would work collaboratively with stakeholders, including the private sector, to draft equitable and growth-oriented tax policies.

Strengthen the Revenue Collection Wing: The revenue collection department would undergo capacity building, focusing on digitization, compliance monitoring, and taxpayer services to ensure is implementation of policies.

Adopt Technology: Leveraging digital platforms for tax filing, data analysis, and compliance tracking would reduce administrative bottlenecks and enhance operational efficiency.

Capacity Building and Training: Both units would need specialized training to handle their respective roles effectively. International collaborations could play a key role in knowledge transfer and best practices.

While the separation offers significant benefits, its implementation comes with challenges:

Coordination: Ensuring seamless communication between the policy and revenue arms is critical to avoid misalignment.

Resistance to Change: Institutional inertia and vested interests may resist restructuring efforts.

Initial Costs: Setting up a new unit and revamping processes require substantial investment.

Separating tax policy and revenue collection in the NBR is a bold step toward modernizing Bangladesh’s tax administration. If implemented effectively, it could lead to greater economic efficiency, higher revenue collection, and improved public trust in the tax system. While challenges exist, the long-term benefits of such reform are undeniable, positioning the NBR as a forward-thinking institution ready to meet the demands of a dynamic economy.