Bangladesh faces a widening gap between registered taxpayers and those who actually file returns, a problem that threatens the country’s fiscal health and undermines public trust in the tax system. Despite more than 12 million citizens holding Taxpayer Identification Numbers (TINs), around 35 percent did not file returns in the last fiscal year, according to an analysis by the National Board of Revenue (NBR).
The problem is not new. Bangladesh has one of the lowest tax-to-gross domestic product (GDP) ratios in the world—just 6.7 percent—well below the average in comparable developing countries. The government cannot meet the growing demands for infrastructure, education and health services without a stronger and more reliable revenue base. Unless compliance improves, Bangladesh risks a cycle of underinvestment, increased borrowing and weakened state capacity.
The scope of the non-filing problem is clear. In fiscal year 2025, some 5.3 million TIN holders failed to submit returns. Tax officials opened files on only 1.3 million of them, and just 0.9 million received notices for non-compliance. That means fewer than one in five non-filers were even contacted, and of those who received notices, only 18 percent responded. The weak follow-up shows that enforcement remains inconsistent and ineffective.
Part of the problem lies with the system itself. Penalties for non-filing are minimal, especially for first-time offenders. Tax officials also acknowledge that manpower and resources are stretched thin, with field officers focusing on high-income taxpayers to meet collection targets rather than expanding the base. Chasing wealthy taxpayers yields quick results, but it leaves millions of middle-class and marginal taxpayers outside the net.
Bangladesh’s approach stands in stark contrast to practices in the world’s advanced economies. In countries of the Organisation for Economic Co-operation and Development (OECD), filing is not left to voluntary compliance and weak enforcement. Tax agencies rely on automation, data sharing and strict penalties to ensure that registered taxpayers cannot simply disappear. Employers withhold income taxes at the source, banks report financial transactions directly to tax authorities, and non-filers face escalating fines that quickly outweigh the cost of compliance.
In the United States, for example, failure to file a return results in penalties of 5 percent of unpaid tax per month, up to 25 percent, plus interest. In the United Kingdom, taxpayers are fined £100 immediately if they are even one day late, with fines escalating after three, six and 12 months. Digital systems automatically compare employer, bank and property records with filed returns, flagging discrepancies instantly. The result is that tax evasion through non-filing is the exception, not the rule.
Bangladesh must move in the same direction. The first step is to strengthen enforcement. Penalties need to be meaningful and automatically applied through digital systems, rather than treated as a discretionary option. Escalating fines for repeat offenders will make compliance the rational choice for taxpayers.
Second, automation and data matching should be at the heart of reform. Linking the NBR system with banks, employers, property registries and utility companies would create an integrated view of taxpayer activity. Artificial intelligence (AI) could be deployed to identify high-risk non-filers, ensuring that scarce manpower is used where it will have the most impact.
Third, Bangladesh should expand withholding at source. Employers should be required to deduct tax from all salaries, and financial institutions should withhold taxes on interest and dividends before they reach account holders. This approach shifts the compliance burden from individuals to institutions and guarantees revenue upfront.
Fourth, tax zones must be given more resources and training. Investing in digital tools and expanding staff capacity would allow officers to handle both current returns and compliance follow-up. Without this, the system will continue to rely on outdated manual work and discretionary enforcement.
Reform must also go beyond penalties and enforcement. Building a culture of compliance requires creating incentives for honest taxpayers. Offering small rebates or faster service for compliant filers can help build trust. Bangladesh has already linked proof of tax return submission to 40 services, but this linkage could be expanded further. At the same time, the government must communicate more effectively about where tax money goes, reinforcing the idea that paying taxes funds schools, hospitals and roads.
The current approach of targeting only wealthy taxpayers may help in meeting immediate collection targets, but it is short-sighted. Broadening the tax base by ensuring compliance among middle-class and marginal taxpayers would not only raise revenue but also create fairness in the system. Even small contributions from millions of filers add up to substantial resources for the state.
Bangladesh has made progress in expanding the number of registered taxpayers, growing from fewer than 1.7 million in 2015 to more than 12 million today. But the gains are hollow if millions of TIN holders fail to file. Unless registration is matched with enforcement and compliance, the tax base will remain narrow and the government will remain underfunded.
The lesson from OECD countries is clear: compliance is not optional, and it is not left to chance. Strong penalties, automated data systems and source-based withholding close the door on non-filing. Bangladesh must adopt similar tools, adapted to its own context, to bring its tax system into line with international standards.
The government has no shortage of warnings. Its own data shows that non-filing is widespread, penalties are ineffective and enforcement is limited. The NBR’s orders to issue notices are a step forward, but they are far from sufficient. What is needed is a comprehensive reform that ensures every TIN holder files, no exceptions.
Bangladesh’s future growth depends on its ability to raise revenue at home. The country cannot rely indefinitely on loans, grants or remittances to sustain development. A fair and effective tax system is the foundation of a strong state, and that requires closing the compliance gap. The message must be unambiguous: everyone with a TIN has a duty to contribute their fair share.