Increasing Tax Revenues and Transparency in Bangladesh

Key Contact
Tracey M. Lane
Start Date
End Date
Funding Amount
$ 46,400
Knowledge-providing Countries
Knowledge-receiving Countries


Tax reforms are demanding :Taxes are known for being one of “life’s certainties” but yet a difficult subject that generally raises strong views and negative sentiments. This was no different in Bangladesh where the government is implementing a Value Added Tax (VAT) Improvement Program funded by the World Bank Group. The program is designed to administer a new VAT Law, but has been faced with vested interests and internal resistance. Recognizing a weak capacity to tackle these challenges, the team responsible for the process recognized that it would greatly benefit from the implementation experience and insights from another developing country that had gone through similar reforms. With a grant from the South-South Exchange Facility, the Bangladesh government project team engaged in a knowledge exchange with Vietnam, which had a long history of implementing tax reforms, including VAT automation and administration reform.  

A development challenge

One of Bangladesh's main development challenges is the low tax revenue mobilization capacity, which makes the VAT Improvement Program extremely strategic and relevant. The program aims at increasing VAT revenues and enhancing the compliance and trans­parency of the VAT administration in order to achieve Bangladesh's medium-term revenue target of a tax-to-GDP ratio of 12.2 percent by fiscal year 2021. Currently, Bangladesh performs below many other countries in South Asia. With a tax-to-GDP ratio of 10.4 percent in 2012, the tax revenues were insufficient for Bangladesh to finance the investments in human and physical infrastructure required to alleviate poverty and propel Bangladesh to become a middle-income country by 2021, as envisioned in the country's development strategy. The adoption of a new VAT Law in 2012 paved the way for a modern VAT with a limited list of exemptions to be introduced in Bangladesh.

A bureaucratic challenge

Bangladesh's National Board of Revenue (NBR) was facing management, organizational, and capacity constraints that enabled tax fraud and tax avoidance. The VAT management procedures and core business processes were cumbersome, relying on manual procedures and administrative assessments, as well as frequent contact with taxpayers, which in turn created opportunities for unwarranted discretionary behavior by tax officials.  Modernizing the system was therefore needed, but overcoming the resistance to reforms would be crucial.

Knowledge exchange objective

The overall objective of the knowledge exchange was to enhance the capacity and knowledge of the NBR's VAT implementation team and other key stakeholders in the NBR VAT Wing and field offices. With an aim to successfully design and implement a comprehensive change management program together with a new automatization program for VAT administration, the participants in the knowledge exchange set an agenda to develop realistic programs, action plans, and contract-management skills needed for a successful reorganization and implementation of modern information and communication technology (ICT). In addition, the exchange would enhance their knowledge on what is needed for a successful tax administration program focused on ICT application and business process re-engineering. Participants would also learn from the Vietnam experience on how to deal with vested interests and actively engage with stakeholders who stand to gain from the reforms.

The study tour delegation

A delegation from Bangladesh comprising 20 high-level government officials vi­sited the General Department of Taxation in Vietnam on September 20-27, 2014. The participants were all key stakeholders either directly involved in the VAT Improvement Program or those expected to play a key role in providing the con­tinual commitment and political support needed to implement such a complex and comprehensive tax reform. Barrister Jahangir Hossain, VAT Policy Mem­ber and Project Director, led the delegation that included representatives from the Project Office of the VAT Improvement Program, the VAT Wing Headquarters, the most revenue-productive VAT commissionerates, the VAT Large Taxpayer Unit, and the Internal Resources Division of the Ministry of Finance.

Lessons learned

Lessons of a general nature gleaned from this, but applicable to all exchanges are discussed in the following section. The Bangladeshi delegation came away from the knowledge exchange with a wealth of new know-how and valuable insights. Their participation in Vietnam clearly demon­strated their com­mitment and willingness to learn more from teams who have practical experience. Recognizing the need for the core VAT management reform team to be exposed to other successful country expe­riences, the Government moved ahead with the VAT modernization and automation reform with added field visits to Georgia and Uganda. These visits were funded with the country’s own resources. The WBG team is continuing to work closely with the Bangladeshi team to identify adequate country experiences in tax administration modernization and au­tomation for future knowledge exchanges.

Useful lessons for study tour facilitators

  • Group size. Consideration should be given to the total number of participants. Smaller groups make logistics easier for both the organizer and the knowledge provider agency. The need for more than one vehicle to transport participants is an added challenge.
  •  Briefings. A hard-copy brief was prepared and disseminated and found to be useful in keeping the dialogue to the more pressing issues. However, at least one pre-departure meeting should be held with the delega­tion so that participants are well briefed on the history of the subject matter; this would cut down on extra time-consuming dis­cussions and presentations.
  • More field time and reporting. Participants should spend more time in the field for reviewing the actual organiza­tion and systems being used. Participants expressed interest in seeing several field operations and challenges with ICT application in different locations. Exchange participants should prepare a back-to-office report summarizing the key discussion items and details of the question and answer sessions and main lessons learned in order to share with colleagues within their respective institutions.
  • Translation. Exchange organizers should recognize the need for an interpreter and the difficulty of inter­preting technical matters. The costs of translation should also be realis­tically budgeted for.
  • Cultural needs. Cultural challenges, such as dietary needs, can be over­come with prior planning.


The tour provided valuable experience for the Bangladeshi delegation to exchange views and ideas with Vietnamese cohorts, and at the same time learn from their mistakes in implementing an extensive tax administration modernization reform. The study tour was an important opportunity for NBR officials to gain critical insights on how to effectively manage its long-term process of institutional strengthening and effective implementation of the broader VAT administration reform agenda. It was instrumental in enhancing the knowledge and skills of the participants who actively engaged in developing high-level strategies and plans. As a result, concept papers for a change management plan, an ICT implementation plan, and a business reorganization plan have now been drafted; and a staff communication and change management strategy has been developed.  In addition, some activities to inform tax officials of the VAT Wing on the new VAT Law and expected impact of the VAT administration reform have been carried out by the project team.

Learned a lot from the successful experience in Vietnam and the potential to raise significantly more revenues. Appreciated the speed at which reforms can progress and their impact. This will help push through complex reforms.

Zakir Hossain
Joint Commissioner, VAT Online Project

The exchange was also successful in creating a momentum for continued learning and cooperation between the two tax authorities that will enhance the value of this study tour. The lead of each delegation, Barrister Jahangir Hossain, Bangladesh's VAT Policy Member and Project Director, and Ms. Le Hong Hai, Deputy General Director of Vietnam's Government Department of Taxation, expressed their strong commit­ment for cooperating in the future and establishing a partnership between the two tax administra­tions.

From the very start, the Government of Bangladesh has been committed to the knowledge exchange. To en­sure sustainability and continued close cooperation with Vietnam’s Government Department of Taxation, the Government has accordingly included and budgeted for an exchange program for the entire duration of the VAT Improvement Program.

To expose other stakeholders in Bangladesh to the potential value of the reforms and the impact that can be expected in terms of revenues, preparations are underway for a follow-up exchange program to Vietnam in July 2016 with representatives from Bangladesh's private sector. This expanded knowledge-receiving exercise broadens the scope of learning from Vietnam's successful tax administration reform, which brought the government revenue envelope up to 20 percent of GDP.