Unless taxpayers and tax collectors work together to achieve the goal of revenue for the development, tax terrorism will continue to thrive, writes Ahmed Munirus Saleheen
THIS is for perhaps for the first time we have heard a new expression with regard to taxation in Bangladesh: tax terrorism. Recently, in an investment dialogue organised by the Bangladesh Investment Development Authority, a prominent business leader raised his voice against ‘tax terrorism.’
Although various elements of tax terrorism encourage corruption in the tax system, tax corruption and ‘tax terrorism’ are not synonymous. ‘Tax terrorism’ is a bureaucratic process within a legal framework, which is characterised by the abuse of power, especially excessive discretionary power of tax officials, policy unpredictability, discriminatory application of law, and overly aggressive enforcement of the rules. In this, there is a shift from a supportive regulatory environment to one characterised by fear and coercion.
While it is generally detested by taxpayers, for the tax authorities, it may mean a tool for better tax compliance and, hence more revenue. ‘Tax terrorism’ thus may be seen as a ‘reaction’ rather than an ‘action’. For, the tax authorities appear to use the process in response to problems such as reluctance to comply with tax obligations, tax evasion and tax avoidance. In Bangladesh, one trigger for ‘tax terrorism’ is the pressure to achieve higher tax revenue targets compared to the existing revenue potential and capacity.
It is a big paradox in the tax system of Bangladesh that on one side there are allegations of tax terrorism and on the other side there is a pathetic picture of tax-GDP ratio. According to the chairman of the National Board of Revenue, the tax-GDP ratio has decreased from 7.4 per cent in the previous year to 6.6 per cent this year. Narrow tax base compared to GDP, unsatisfactory tax compliance situation, tax evasion, widespread tax exemption, weakness of tax-revenue management and corruption, etc are broadly identified as the reasons for the low tax-GDP ratio.
Persons with the knowledge of Bangladesh taxation system would admit that the elements of ‘tax terrorism’ are strongly present in the tax system of Bangladesh. One example of policy driven-discrimination is the provision for whitening black money in the Income Tax Act. This scheme allows an individual to legalise undeclared assets by paying a nominal 15 per cent tax, while honest taxpayers have to face a rate of up to 30 per cent. Many, including the World Bank and Transparency International Bangladesh, have called it a corruption-enhancing and discriminatory provision. Another such provision is the Minimum Tax Provision for Companies. On August 26, 2025, at a roundtable discussion at the Centre for Policy Dialogue, keynote speaker Tamim Ahmed commented that while the provision of minimum tax for companies, regardless of profit or loss, ensures their contribution to government revenue, it hinders the objective of fairness in the tax system. At the same event, the NBR chairman himself admitted, ‘Undoubtedly, this is a black law’. He also frankly admitted that repealing such ‘black laws’ would further reduce the country’s tax revenue collection.
The excessive discretionary power of the tax authorities in Bangladesh is another worrisome issue which also paves the way for tax terrorism. Determining the notional tariff value of imported goods instead of the actual transaction value in the Customs law and imposing presumptive VAT of VAT-paying businesses in the VAT law are just a couple of examples of discretionary power vested on the NBR or individual officers of Customs and VAT. Here too, in defence of the discretionary powers, it is widely argued that many importers resort to under-invoicing and VAT registered traders do not report their actual sales.
Whether an ‘action’ or a ‘reaction’, tax-terrorism activities at the end of the day often create discriminatory sufferings for honest taxpayers, create unhealthy competition in business and discourage investment, thus making it an unwanted burden on the country’s business and economy.
The government must take the first initiative to reduce tax terrorism. In this case, the tax administration must come out of the one-sided focus of achieving revenue targets by coercibly enforcing the law without paying little or no heed to the basic principles of taxation — certainty, transparency and fairness. We must not forget that tax compliance — obligatory or voluntary — presupposes trust and respect. And, to gain the trust and respect of the taxpayer, the accountability of the tax administration must be ensured in the first place.
However, imposing the responsibility for the alleged tax terror solely on the government is tantamount to presenting a matter in a fragmented manner without understanding the entirety of the issue. In this case, the taxpayers and the business community also have a lot of responsibilities at the backdrop of the context, mentioned earlier, in which tax terrorism flourishes. Given the urgency of maximising revenue in a poor-tax GDP ratio scenario, taxpayers in general and business community in particular must cooperate with tax authorities, especially in the areas of tax compliance, fair implementation of tax laws and rules, tax base expansion and the prevention of tax evasion. Sccording to CPD estimates, the amount of tax evaded in 2023 is two and a half lakh crore takas. Instead of keeping themselves preoccupied only with their demands for reduced tax or easier compliance mechanism, they also must come up with clear and unambiguous proposals on what to do in the government’s policies and policy implementation to raise the country’s tax-GDP ratio to the desired level.
Unless both taxpayers and tax-collectors work together to achieve this essential goal of ‘revenue for the development of the country’, tax terrorism will continue to thrive and we will continue to revolve in the circle of blame-game. A win-win approach is essential for curbing tax terrorism. And suppressing ‘tax terrorism’ is necessary not only to alleviate business hardship, but also to build a fair, transparent and self-reliant economy.
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