Domestic revenue must be strengthened to reduce reliance on borrowings and aid, said Finance Adviser Salehuddin Ahmed.
“Without our own income, we cannot move far by taking loans or grants,” he said while addressing a seminar marking National VAT Day at the headquarters of the National Board of Revenue (NBR) in Dhaka on Wednesday.
Borrowed money always comes with conditions and long-term obligations that limit the country’s fiscal freedom, the adviser said.
“Foreign loans are not like eating ‘dream polau’. In a dream you can eat polau and pour unlimited ghee on it — but reality doesn’t work that way. Loans come with costs. Grants are limited,” Ahmed added.
He further said Bangladesh’s low tax-to-GDP ratio — one of the lowest in Asia — restricts the government’s ability to independently fund education, healthcare and social protection.
“If we do not increase our domestic resources, how will we carry out our work? When we rely on loans to fund core services, we lose flexibility. With our own resources, we can prioritise freely,” he said.
Emphasising the need to improve public trust in tax utilisation, he said, “In some countries, the tax-to-GDP ratio is 26 per cent because people trust that their money will not be siphoned abroad. We must ensure every taka collected is used for public services. When citizens see their tax money benefits them, they will pay voluntarily.”
The adviser criticised widespread VAT evasion at the retail level, saying that a large portion of VAT paid by consumers never reaches the state treasury.
“People often ask whether a shop charges VAT. If the answer is yes, they go somewhere else. This mentality must change,” he said.
Pointing to systemic gaps, he described VAT as a modern and effective tax tool that is being undermined by irregularities and weak enforcement.
“The process must be simplified so that revenue actually reaches the treasury,” he said, calling for broader use of IT-based solutions and stronger monitoring.
He cited international examples of strict billing practices, recalling how a pharmacy in Kolkata refused to let any customer leave without a printed bill.
“That is what responsibility looks like,” he remarked.
NBR Chairman Abdur Rahman Khan, who chaired the event, said resistance to VAT has decreased significantly since its introduction.
“When VAT was introduced, 95 per cent of businesses opposed it. Yet this system expanded the government’s revenue base. Without VAT income, we could not fund allowances for the elderly, widows or freedom fighters,” he said.
Khan said the NBR is preparing a government-financed software platform to help small and medium enterprises file VAT more easily.
“If we cannot collect VAT from small businesses, pressure on large taxpayers will continue to grow,” he said.
He acknowledged that Bangladesh’s tax-to-GDP ratio has fallen from 10% to 6%, partly due to GDP recalculations and incomplete coverage of economic activities. Further research is needed to identify which sectors remain outside the tax net, he noted.
Despite the decline, overall revenue collection has been rising by around 15 per cent annually, Khan said, expressing hope that growth may reach 20 per cent by year-end.
