An unexpectedly large shortfall in revenue collection for the just-ended fiscal year underscored the challenges facing the National Board of Revenue as it navigates economic headwinds, political upheaval, and a slower pace of ADP implementation. With the revised target set at Tk4.63 lakh crore and the initial goal at Tk4.80 lakh crore, the year closed with a revenue gap that surprised policymakers and analysts alike. While officials acknowledge the annual performance fell short, they also point to a combination of cyclical and structural factors that influenced the outcome, including reduced economic activity following the mid-year political transition, bottlenecks in ADP disbursement, and intensified protest and shutdown campaigns late in the year. The broader context of the revenue performance points to a complex interplay between growth, tax administration, and public investment that will shape policy choices in the run-up to FY26. As observers weigh the implications, the government has signaled a more aggressive target for the next year, recognizing both the need to bolster revenue collection and the challenges inherent in achieving higher growth without addressing underlying bottlenecks.
FY25 Revenue Performance: Targets, Shortfalls, and Trajectories
In the just-concluded fiscal year, the National Board of Revenue (NBR) reported a substantial gap between actual revenue collection and the revised target, reflecting a downturn that surprised many observers who had expected a more resilient performance given the broader macroeconomic dynamics. The year began with a policy stance that anticipated a robust revenue inflow sufficient to sustain public spending plans and development initiatives. However, by the close of FY25, the revised target of Tk4.63 lakh crore had already been a downgrade from the original plan of Tk4.80 lakh crore, signaling early recognition within the NBR that achieving the initial ambitions would be difficult.
The shortfall against the revised target stood at a notably large margin, illustrating how the revenue program faced interruptions at multiple points during the year. The gap against the initial target of Tk4.80 lakh crore was even more pronounced, underscoring the magnitude of the challenge in maintaining momentum across the key revenue streams. Advanced projections and internal assessments were not static; as the fiscal year unfolded, the NBR and associated ministries recalibrated expectations in response to shifting economic conditions and governance realities. This recalibration was not merely a matter of arithmetic adjustments but a reflection of evolving on-the-ground conditions that affected tax collections across major components such as value-added tax (VAT) and income/source taxes, as well as the broader fiscal environment in which tax administration operates.
A critical data point in the post-year assessment was the early indication from NBR leadership that the final revenue figure would be lower than previously anticipated. This admission highlighted the difficulties of balancing ambitious revenue targets with the realities of the year’s economic trajectory and governance environment. According to statements from NBR officials, the year’s shortfall must be understood in the context of a broader macroeconomic slowdown and the specific political and policy factors that influenced business activity and tax compliance during FY25. While some analysts had warned about the risks associated with high-targeting for revenue, the actual outcome provides a concrete case study of how ambitious targets can struggle to translate into realized collections when growth is uneven and administrative efficiency is challenged.
Within this framework, estimates provided by the NBR and independent analysts indicated that even the revised target was a challenging benchmark. By the close of the year, the NBR projected that FY25 revenue collection would be around Tk3.70 lakh crore, a figure that would still indicate a sizable deviation from the revised target of Tk4.63 lakh crore. If that projection holds, the shortfall against the revised target would be approximately Tk0.93 lakh crore, and the gap relative to the original target of Tk4.80 lakh crore would approach Tk1.10 lakh crore. These numbers illustrate the scale of the underachievement and point to underlying structural factors that need to be addressed to restore revenue growth momentum in FY26 and beyond.
Beyond the headline numbers, the analysis of growth rates in FY25 shows a stark departure from the patterns observed in most recent years. NBR data and expert commentary suggest that revenue growth hovered around a little over 2% for the year, a pace that stands in sharp contrast to the growth trajectory of the broader economy and to recent historical patterns in which revenue collection occasionally outpaced general economic growth. In particular, the assessment notes that over the last two decades, only the COVID-19 year saw a disruption that produced comparable or more severe consequences for revenue growth, with other years generally delivering stronger growth than observed in FY25. This context helps explain why the year was characterized by a rare combination of growth underperformance and a constrained revenue envelope, even as the economy itself demonstrated resilience in other dimensions.
Analysts and policymakers also highlighted the relatively weak performance of the development program in the year, as measured by the implementation rate of the Annual Development Programme (ADP). The planning ministry data indicated that only 49% of the ADP was implemented in the 11 months from July to May of FY25, marking the lowest level seen in more than a decade and a half. This limited execution of public investment not only constrained economic activity but also undermined revenue potential arising from taxes collected in association with investment and procurement activity tied to ADP expenditures. The interaction between ADP implementation and revenue collection forms a crucial part of the narrative on FY25, as the tax base and revenue-generating transactions are often linked to the pace at which development projects materialize and purchase orders translate into taxable activity.
The overall performance pattern in FY25, therefore, can be summarized as follows: ambitious targets, a marked shortfall against revised goals, a modest growth rate for revenue, and a correlation with slower development spending. Taken together, these elements suggest that the fiscal framework in FY26 would need to be recalibrated with attention to the structural constraints that constrained FY25—namely, the economic environment after political upheavals, the pace of public investment, and the operational capacity of the tax administration in a period of stress and transition. The data and narratives surrounding FY25, while pointing to a period of difficulty, also provide a foundation for policy design aimed at strengthening revenue performance while maintaining momentum in public sector development.
In a broader historical lens, the NBR’s FY25 performance must be understood within the long arc of revenue collection trends in the country. An analysis of two decades shows that the growth rate in revenue collection generally tracks the performance of the economy, with exceptions such as the pandemic year that created a temporary deviation. The FY25 year stands out as an outlier, albeit one that resonates with a pattern of constrained growth observed in the final stretch of the period. The magnitude of the shortfall, when viewed in the context of the revised targets and the pre-existing expectations, underscores the need for strategic reassessment of revenue raising, administrative efficiency, and the pace of development activity to ensure that the next year’s targets are aligned with realistic projections and sustainable growth trajectories.
Contributing Factors: Economic Slowdown, Political Changes, and ADP Implementation
Several interlocking factors converged to shape FY25’s revenue outcome, with the most prominent being a slowdown in economic activity linked to political change and governance dynamics around the July period. Analysts and officials note that the post-uprising environment had dampening effects on business confidence, investment decisions, and tax compliance behaviors that collectively weighed on revenue collections. The slowdown in key engines of growth—manufacturing, services, and trade—translated into softer VAT inflows, lower income tax receipts from corporate profits and personal earnings, and reduced performance in other revenue streams tied to economic activity. While the GDP growth figures might have shown resilience or modest expansion in certain indicators, the revenue side failed to translate those dual signals into commensurate tax collections, highlighting a disjunction between macro growth and fiscal receipts in the year.
Another critical factor identified by officials and independent researchers is the lag in implementing the ADP, the annual framework that channels government spending into development projects. The ADP is an important driver of government procurement, construction activity, and related tax receipts. When the ADP is not disbursed or executed quickly and efficiently, a corresponding decline in revenue collection—especially from indirect taxes such as VAT and tax receipts linked to commercial activity and supplier chain transactions—follows. The analysis of FY25 shows that only about half of the planned ADP investments were realized by late May, indicating a substantial slippage in public investment that has implications not only for growth but also for tax compliance and revenue generation. Slower ADP execution reduces opportunities for taxable transactions across the economy and, in turn, depresses VAT collections and other tax revenues tied to the performance of public sector spending.
The political changeover following the July upheaval added another layer of uncertainty that weighed on revenue prospects. Protests, shutdowns, and intermittent disagreements between stakeholders and public authorities can disrupt business operations, deter investment, and complicate enforcement and compliance efforts. In such an environment, taxpayers may face greater compliance risk, and authorities may encounter operational bottlenecks as staff and policies adjust to new political realities. Experts interviewed by policy think tanks and media outlets highlighted these disruptions as significant, even if the direct fiscal channels were not always easy to quantify. In sum, the political and social climate of the year created a background in which revenue collection faced headwinds beyond the standard economic cycle, reinforcing the need to view FY25 results as the product of both cyclical downturns and structural constraints in governance and investment execution.
An integral part of the discussion around FY25 is the question of whether targets were set ambitiously to the point of becoming impractical. Experts who track fiscal planning frequently caution that setting revenue targets too far above the plausible trajectory can create a credibility gap and complicate implementation. In the FY25 context, several analysts argued that the targets were overly optimistic given the health of the economy, the pace of ADP, and the administrative pressures facing the NBR. While this assessment is not meant to absolve the NBR of responsibility for meeting its revenue goals, it emphasizes the importance of aligning targets with observable indicators—such as ADP implementation rates, base tax compliance, and growth momentum—so that revenue plans are realistic and achievable.
On the ground, NBR officials and external experts also noted that the slow pace of ADP disbursement and lower-than-expected revenue from the VAT and other indirect taxes are mutually reinforcing. When ADP performance falters, the resulting lag in procurement, construction, and project activity leads to fewer taxable events, which in turn slows VAT collection and other revenue streams that depend on active economic activity generated by public investment. This feedback loop underscores the need for a coordinated approach to fiscal policy that integrates development spending decisions with revenue administration and enforcement strategies to ensure a more stable revenue path even when external conditions are challenging.
In this context, CPD (Centre for Policy Dialogue) researchers emphasized that the gravity of the shortfall was not solely an outcome of the July uprising. Towfiqul Islam Khan, a senior research fellow at CPD, argued that a certain degree of revenue contraction was expected due to the broader slowdown; however, the magnitude observed exceeded those expectations. He explained that the slow ADP implementation and the protests at the end of the fiscal year contributed to the miss, but the underlying expectation that GDP growth in the year would translate into revenue growth of a similar magnitude did not materialize. He suggested that if the growth rate in the economy at current prices was projected to approach or exceed 10%, then the revenue growth should have similarly reflected a more favorable rate, potentially around a similar magnitude. Instead, revenue growth remained modest, illustrating a disconnect that stakeholders will need to address in the fiscal planning framework for FY26.
The data on ADP implementation offers a concrete anchor for understanding the dynamics at play. According to the planning ministry’s statistics, the ADP implementation rate for FY25 stood at 49% in the period from July to May, the lowest in the last 10 to 15 years. This performance metric is critical because it directly influences revenue realization: a slower or incomplete ADP roll-out reduces government expenditures and procurement activity that would typically stimulate revenue streams through VAT, duties, and income taxes from project-related activity. Experts argued that the pace of ADP spending not only reflects budgetary discipline but also the absorptive capacity of the economy to absorb large-scale development programs. In their view, a more aggressive ADP rollout would likely have added momentum to revenue collection by broadening the tax base and creating more taxable economic activity.
In sum, the FY25 revenue outcome appears to be a function of three main channels: a broader economic slowdown in the face of political change, a slower-than-ideal ADP execution that curtailed development-related tax opportunities, and a governance and enforcement environment that faced headwinds in the latter part of the year. Each of these factors interacts with the others, creating a composite effect that makes it difficult to isolate any single driver as the sole cause of the shortfall. For policymakers, the takeaway is clear: sustained growth in revenue collection will require a coordinated strategy that addresses macroeconomic conditions, accelerates ADP implementation, and strengthens the institutional framework for tax administration and compliance, all while maintaining fiscal stability and social and economic resilience.
Official Forecasts and Data Limitations
The NBR’s official stance during the process of year-end data consolidation highlighted both the uncertainties and the constraints that come with late-stage data availability. The board’s chairman, Abdur Rahman Khan, indicated that the final figures for FY25 revenue collection had not yet been fully compiled at the time of his public remarks. He cautioned that the numbers could be revised as more data became available and as the tax administration’s internal reconciliations concluded. This caution was consistent with a broader pattern in national fiscal reporting, where late-year revisions are common as new information emerges and as accounting procedures are completed. The chairman’s forecast that the revenue collection could land at Tk3.70 lakh crore, if realized, pointed to a shortfall relative to both the initial target and the revised target, reinforcing the sense that the year would close with a relatively weak performance by historical standards.
The variance between the revised target and the actual collection is instructive for understanding how the revenue apparatus adjusts expectations in response to ongoing developments. The revised target of Tk4.63 lakh crore reflected a downward re-baseline that sought to align government expectations with emerging data and risk factors. The shortfall against this revised target would be around Tk0.93 lakh crore, and the deficit against the initial target would approximate Tk1.10 lakh crore. This two-dimensional shortfall framing is important for policymakers, lenders, and market participants because it clarifies the magnitude of underachievement relative to both the ambitious year-end objective and the more conservative planning benchmark.
In evaluating the data landscape, it is essential to recognize the limitations inherent in any retrospective assessment of fiscal performance. The efficiency and accuracy of tax collection depend on several variables: timely filing, compliance initiatives, enforcement actions, and administrative capacity at revenue collection points. In FY25, some of these variables were disrupted by the year’s political events and the slower ADP execution, complicating the task of achieving accurate, timely assessments of revenue performance. Analysts pointed to the need for a more transparent and systematic approach to data release that would facilitate better policy design and more precise forecasting in the upcoming year. At the same time, it is important to note that even with data caveats, the trend lines observed—namely, the shortfall against revised targets and the low ADP implementation rate—provide meaningful indications about the structural pressures shaping revenue collection.
Within the official ecosystem, the planning ministry and the NBR may implement cross-cutting monitoring mechanisms in FY26 to prevent a recurrence of the FY25 shortfall. One policy implication is to factor ADP execution more explicitly into revenue projections so that tax planners can build in a more realistic expectation of revenue generation that is correlated with development expenditure and its tax implications. Another implication is to strengthen data-sharing and reconciliation processes across departments to reduce delays in finalizing annual figures. By doing so, the financial authorities can deliver more reliable targets that reflect both macroeconomic conditions and administrative realities, enabling policymakers to calibrate revenue expectations with greater precision.
From the perspective of credibility and market expectations, the FY25 outcomes underscore the importance of prudent target-setting that considers a range of potential risks. While ambitious targets can motivate enhanced performance, overly aggressive targets can erode confidence if they consistently fail to materialize. In this context, the NBR’s approach to FY26—setting a revised target of Tk4.99 lakh crore—signals a more conservative stance, albeit still aspirational, given the anticipated growth trajectory and the plan to accelerate ADP implementation. This recalibration aims to balance the need for revenue sufficiency to support development and social spending with the imperative of credible, achievable targets that reflect current realities. As the fiscal authorities move forward, transparency around data, proactive communication of targets, and a robust implementation framework will be critical to rebuilding credibility and ensuring a stable revenue path.
Expert Analysis: Growth, Gap, and the Revenue-Growth Disconnect
Experts across policy circles have been dissecting the FY25 revenue gap to understand its root causes and to anticipate the trajectory for FY26. Towfiqul Islam Khan, a senior research fellow at the Centre for Policy Dialogue (CPD), offered a nuanced read, recognizing that a modest dip in revenue was plausible in the context of the July uprising and the ensuing instability. However, he stressed that the magnitude of the shortfall exceeded what would have been expected from a typical cyclical slowdown. He attributed the larger-than-anticipated miss to a combination of slow ADP execution and end-of-year disturbances among officials and decision-makers, which disrupted planned collection activities and created a drag on revenue performance.
Khan’s assessment aligns with a broader argument that the revenue growth trajectory in FY25 did not align with the macroeconomic growth narrative. He pointed out that the economy’s growth rate, measured at current prices, was expected to exceed 10%, suggesting that tax revenue should have been able to rise at a rate more in line with that growth. Yet, the revenue expansion was more modest, at approximately 2%. This disconnect—between robust or even lofty GDP growth indicators and relatively flat revenue growth—highlights fundamental challenges in the tax system’s capacity to translate economic expansion into commensurate revenue gains. It also raises questions about the elasticity of tax collections and the effectiveness of revenue administration in converting growth into tax receipts.
A critical aspect of the CPD analysis centers on the relationship between ADP implementation and tax revenue. The CPD and allied researchers argued that a stronger and more timely ADP would have created favorable conditions for higher revenue collection by driving economic activity around development projects. The logic is straightforward: ADP-financed projects generate demand for goods and services, revenue from VAT and duties on those transactions, and income tax from workers and suppliers. When ADP is slow, this chain falters, and the resulting shortfall in revenue becomes evident in the annual accounting results. Khan’s commentary suggests that the public finance architecture would benefit from a framework that ensures a more predictable and rapid ADP cycle, alongside enhanced enforcement and compliance measures to maximize tax receipts from the existing base.
The emergence of the 49% ADP completion rate over the July-May period was a focal point in expert commentary, underscoring a structural constraint to revenue performance. Analysts argued that the low share of ADP execution reveals systemic capacity issues, prioritization choices, and potential bottlenecks that impede the government’s ability to translate planned development into actual economic activity and revenue streams. The analysis further notes that the ADP’s underperformance has a feedback effect on revenue collection beyond the immediate quarter, creating a lingering impact that complicates annual targets and undermines revenue planning for subsequent years. This understanding reinforces the case for reforms that streamline procurement, accelerate project disbursement, and strengthen governance mechanisms to ensure timely, transparent, and effective use of development funds.
The long-run lesson from FY25, according to these analysts, is that revenue collection is not only a function of macro growth but also of a well-functioning administrative framework, consistent policy signals, and coherent development spending. The disconnect between growth and revenue invites policymakers to consider reforms that strengthen tax base broadening, improve the efficiency of tax administration, and enhance the efficiency and impact of ADP-funded investments. In addition, the experts emphasized the importance of credible and consistent data reporting to support policy decisions and maintain investor and market confidence in the country’s fiscal management. The consensus among CPD researchers is that addressing the revenue gap in FY25 requires a multi-pronged approach that aligns macroeconomic strategy with administrative reform and targeted development activity.
ADP Implementation and Revenue Linkage: The Mechanisms at Play
The relationship between ADP implementation and revenue collection is central to understanding FY25’s outcomes. The ADP is the vehicle through which the government channels its development spending, and the velocity and scale of this spending influence the level and pace of taxable activity across the economy. When ADP disbursement is delayed or under-executed, the cascade effect includes delayed procurement, slower project execution, and reduced demand for inputs and services. This, in turn, translates into weaker VAT collections as merchants and suppliers face slower turnover and fewer taxable transactions. Similarly, organic growth in tax revenue from income taxes and other sources is impeded when the activity levels in the economy are depressed due to delayed or dampened development spending.
In FY25, the data point that stands out is the low level of ADP implementation—49% over the 11 months from July to May. This figure, described as the lowest in more than a decade and a half, is a bellwether for the revenue underperformance. Analysts argue that the public investment channel was not fully activated, leading to fewer taxable events, weaker revenue from corporate and personal income taxes, and diminished VAT receipts from trading and service sectors. The correlation between ADP execution and revenue performance is not necessarily linear, but the connection is strong enough to justify a policy focus on accelerating the ADP pipeline to bolster revenue growth. The ADP link also underscores the broader question of how public investment and tax administration can be synchronized to maximize fiscal outcomes.
Towfiqul Islam Khan highlighted a noteworthy policy consideration: if discussions had occurred earlier regarding officials’ demands and the legal or institutional reforms affecting the NBR, there could have been less negative impact on revenue collection. While this point is situated within a broader governance debate, it underscores the sensitivity of revenue outcomes to administrative and policy reforms and the surrounding political economy. It suggests that revenue performance is not merely a function of technical targets or macro numbers but is intertwined with the environment in which revenue authorities operate. The implication is that governance reforms, if executed with foresight and coordination, could support more resilient revenue performance even amidst external shocks.
From another angle, the FY25 experience illustrates the importance of designing revenue plans that acknowledge the link between development spending and revenue generation. If ADP is a critical engine of revenue through VAT and other taxes, then ensuring timely, efficient disbursement, procurement, and project execution is essential. This requires streamlined processes, robust governance, and accountability across multiple agencies, as well as a risk management framework to anticipate and mitigate delays. The policy architecture emerging from FY25 suggests a need for stronger alignment between development budgeting and tax collection forecasts, enabling more realistic targets and more robust mechanisms to track progress and adjust strategies as needed.
In practical terms, the revenue road map for FY26 includes expectations of stronger ADP execution, an improved revenue administration posture, and a recalibrated target that reflects a more cautious, data-driven approach. The government’s decision to set a higher target—Tk4.99 lakh crore for FY26—reflects a balancing act: ambition to restore revenue growth to healthier levels while recognizing the constraints that shaped FY25’s outcome. This approach aims to create a credible path toward higher revenue collection by leveraging a more effective development spending program, improving compliance and enforcement, and enhancing data-driven policy adjustments throughout the fiscal year. The critical task for policymakers will be to implement concrete reforms that translate these goals into tangible results, including steps to modernize tax administration, reduce leakage, and ensure ADP spending aligns with revenue collection potential.
Subsection: The Revenue-Development Nexus in Practice
- Development spending as a driver of tax revenue: ADP projects generate demand for goods and services, creating taxable transactions and employment opportunities that expand the base for VAT, income tax, and other levies.
- Administrative efficiency as a multiplier: Efficient tax administration can convert growth into higher tax collection by reducing evasion, improving compliance, and accelerating the processing of tax filings.
- Governance and stability as a determinant: A stable policy environment, clear guidelines, and predictable enforcement mechanisms encourage investment and compliance, supporting revenue growth even under adverse conditions.
- Data and forecasting as an enabling tool: Accurate, timely data on ADP execution, tax filing rates, and enforcement outcomes empowers policymakers to adjust targets and strategies proactively.
Fiscal Policy Implications for FY26: Target Setting and the Road Ahead
In the wake of FY25’s revenue shortfall and the revised outlook, the fiscal authorities have signaled a renewed emphasis on credibility, realism, and strategic alignment between investment and taxation. The government has set a target of Tk4.99 lakh crore for FY26, a figure that represents a substantial uplift from the FY25 revised target and signals a deliberate push to restore revenue growth momentum. The 35% growth assumption embedded in this target reflects an expectation of stronger performance across macroeconomic and tax channels, including improved ADP execution, a more robust corporate and consumer tax base, and enhanced compliance and enforcement actions within the NBR.
To realize this target, policymakers will likely focus on several strategic levers:
- Accelerated ADP implementation: A faster, more predictable schedule for development spending would stimulate economic activity, thereby broadening the tax base and boosting VAT and income tax receipts. The plan would include improved procurement processes, streamlined project appraisal and approval, and tighter financial controls to ensure timely disbursement and expenditure.
- Tax base broadening and compliance: Strengthening tax administration with modernized IT systems, fraud detection, and data analytics to identify non-compliant actors and broaden the tax net. Targeted enforcement, improved withholding mechanisms, and enhanced taxpayer services would help raise revenue without increasing rates.
- Simplified and clarified tax rules: Reducing compliance costs for taxpayers by simplifying tax codes and improving the clarity of regulations could enhance voluntary compliance and reduce administrative friction, contributing to higher effective tax rates.
- Digitalization and data integration: Investing in digital platforms to integrate tax filing, payment, and enforcement processes could improve efficiency, reduce leakages, and enable better revenue forecasting.
- Expenditure control and reform: Ensuring that ADP-funded projects are not only timely but also value-for-money, with proper auditing and governance, would build confidence in the fiscal framework and support sustainable revenue growth.
- Macro-stability return: Stabilizing the political and economic environment to support business confidence and investment would create a more favorable climate for revenue growth, even when external conditions are challenging.
The fiscal path forward also requires transparent governance and robust data-sharing practices. Policymakers will need to monitor the nexus between ADP rollout and revenue outcomes, adjusting expectations as the year progresses. The aim is to avoid misalignment between development spending and revenue generation by ensuring that tax policy and public investment decisions are cohesively managed. The FY26 plan envisions a more resilient and credible revenue framework, one that can adapt to evolving economic conditions, while maintaining a strong focus on development objectives and fiscal sustainability.
Subsection: Potential Measures to Support FY26 Revenue Growth
- Strengthen VAT compliance and administration to capture more revenue from services and cross-border trade.
- Expand the tax base by addressing gaps in personal and corporate tax compliance, leveraging data and technology to identify non-filers and non-payers.
- Improve customs administration to reduce import leakage and ensure accurate duty collections on goods entering and leaving the economy.
- Promote formalization in the economy to broaden the tax base, including incentives for small and medium-sized enterprises to register and report taxes.
- Enhance public investment governance to ensure ADP projects are delivered on time and within budget, maximizing the revenue potential of development spending.
- Introduce targeted policy measures that sustainably raise revenue without undermining growth, such as broadened tax bases with limited rate changes where feasible and coupled with enforcement enhancements.
Structural and Governance Considerations: Reforms, Ordinances, and Revenue Strategy
An important thread in the FY25 discourse concerns governance and potential reforms affecting the National Board of Revenue’s ability to operate effectively. A notable public comment from CPD researchers referenced the discussions around the NBR’s organizational framework and potential reforms. The suggestion was that had officials’ demands and policy considerations been more broadly discussed within the context of ordinances or structural reforms, the impact on revenue collection might have been mitigated. This perspective underscores the sensitivity of revenue performance to governance arrangements and policy decisions that shape how the tax administration operates and how it interacts with the broader fiscal system.
From a reform standpoint, the FY25 experience points to the need for a more integrated approach to governance that aligns the tax administration with broader development and investment objectives. Reforms could include enhancing the independence and capacity of the NBR while ensuring accountability and transparency across tax collection activities. Such reforms could help to reduce friction, accelerate decision-making, and improve the implementation of revenue-enhancing policies in times of economic stress or political transition.
Another dimension of reform concerns the relationship between tax policy and public investment. A more coherent framework that ensures tax policy supports and is synchronized with development spending could improve revenue performance in years characterized by strong ADP activity. This would entail a systematic approach to planning, budgeting, and monitoring, with clear metrics for evaluating the revenue impact of development projects and policy changes. The emphasis on governance reform is not merely about administrative efficiency; it is about creating a credible and predictable fiscal environment that can weather shocks and sustain long-term growth.
In this sense, the FY25 episode serves as a catalyst for policy debates on how to balance ambition with realism in revenue targets, how to ensure ADP’s role in fostering growth while maximizing revenue, and how to structure governance and reform efforts to support resilient fiscal management. The path forward involves a careful blend of administrative capacity-building, policy clarity, and development effectiveness, underpinned by transparent data and accountable governance.
Sectoral Focus and Revenue Composition: VAT, Source Tax, and Compliance
To understand the mechanics of revenue performance, it is essential to examine the sectoral composition of revenue sources and how each contributes to the overall shortfall or potential growth. VAT often represents a major component of Bangladesh’s revenue, reflecting consumer demand, trade volumes, and the breadth of taxable goods and services. In periods of economic slowdown or reduced consumer activity, VAT collections can soften, particularly if there are distortions in consumption patterns or a shift toward informal sectors. Income tax, including corporate tax and personal income tax, is another critical pillar, closely tied to corporate profitability, employment levels, and wage growth. The FY25 period’s softer revenue growth suggests that corporate earnings and worker incomes did not translate into revenue growth as quickly as expected, potentially due to slower hiring, wage constraints, or tax relief measures that affected net collections.
Customs duties and other indirect taxes also play a significant role in the revenue mix. A slower pace of import activity, changes in import composition, or exemptions that reduce tax liability can all influence the level of revenue earned from these channels. In the context of FY25, the interplay among VAT, income tax, and customs revenue is particularly relevant given the ADP’s impact on procurement-related activities and the broader investment climate. A slower ADP rollout reduces the scale of project-related procurement and consumption, which in turn can affect the revenue potential of VAT and other indirect taxes that rely on such activity.
The outlook for FY26 includes a plan to optimize the revenue mix by strengthening tax administration, broadening the base, and pursuing targeted measures that improve compliance in the VAT and income tax domains. While the exact policy mix remains a matter of policy deliberation, the objective is to ensure that revenue collection remains resilient even as the economy navigates a more dynamic environment. The underlying aim is to achieve a sustainable and credible revenue growth trajectory that aligns with development objectives and the broader macroeconomic context.
In this sense, the revenue composition narrative becomes a diagnostic tool for policymakers. It helps identify which channels are more sensitive to ADP performance, economic activity, and governance reforms, enabling more precise policy calibrations. For instance, if VAT is shown to be particularly sensitive to ADP-induced demand, then optimizing ADP scheduling and procurement processes could have a pronounced effect on VAT receipts. Conversely, improvements in enforcement and compliance within the income tax domain could lift revenues even when ADP activity remains moderate. Such nuanced understanding is essential for designing FY26 strategies that both boost revenue and support sustainable growth.
Subsection: Practical Implications for Tax Administration
- Data-driven revenue forecasting: Strengthening the data ecosystem to forecast revenue more accurately by incorporating ADP, project-level expenditure, and sectoral demand trends.
- Compliance and enforcement focus: Prioritizing high-yield compliance activities to improve revenue without increasing tax rates.
- Digital transformation: Leveraging digital tools to streamline tax filing, payment, and enforcement, reducing leakage and improving taxpayer experience.
- Sectoral targeting: Identifying sectors most sensitive to ADP-driven activity and tailoring policy measures to maximize revenue from those sectors.
Conclusion
The FY25 revenue performance of the National Board of Revenue revealed a marked shortfall against both the revised and original targets, underscoring a complex convergence of macroeconomic softness, political disruption, and administrative bottlenecks in development spending. The observed dynamics—an economy affected by upheaval, an ADP that underperformed in the crucial months, and governance and enforcement challenges within the revenue framework—collectively shaped a year where revenue growth struggled to keep pace with broader growth indicators. The data indicate a revenue growth trend around 2%, in stark contrast to the higher growth that would be expected given the economy’s performance, and point to a notable disconnect between GDP expansion and tax receipts.
Analysts and policymakers agree that the FY25 experience offers a critical lesson: revenue planning must be anchored in realistic projections that reflect the actual pace of ADP disbursement, governance capacity, and macroeconomic headwinds. At the same time, it reinforces the necessity of a credible, multi-pronged strategy to raise revenue in FY26. The government’s revised target for FY26—Tk4.99 lakh crore—signals an intention to reestablish growth momentum by combining a stronger ADP rollout with enhanced tax administration, compliance, and governance reforms. The path forward involves not only targeted policy measures but also structural reforms to strengthen the capacity and credibility of the revenue machinery, ensuring that tax collections align with the economy’s growth potential and public development needs. As the fiscal authorities move ahead, the focus will be on delivering timely data, implementing robust reforms, and pursuing a coordinated approach that harmonizes public investment with revenue generation, thereby laying a stronger foundation for fiscal stability and sustainable economic progress.
