STAR BUSINESS REPORT

Bangladesh’s revenue collection has grown more slowly than the economy over the past decade, indicating substantial untapped revenue potential, according to a recent analysis by the Finance Division.

The analysis showed that the country’s average revenue buoyancy -- a measure of how quickly government revenue grows relative to the economy -- stood at 0.93 between fiscal years 2014-15 and 2024-25.

A revenue buoyancy coefficient above 1 indicates that tax collection is outpacing economic growth, reflecting a highly efficient revenue system. Conversely, a coefficient below 1 suggests revenue growth is trailing economic expansion, often because of structural inefficiencies or a narrow tax base.

In its latest Medium-term Macroeconomic Policy Statement (MTMPS) for FY2026-27 to FY2028-29, published last week, the Finance Division said revenue buoyancy had been highly volatile, peaking at 2.10 in FY21 before plunging to 0.15 in FY22. The coefficient fell again to 0.60 in FY25.

“On average it stood at 0.93, indicating revenue growth has structurally lagged behind nominal GDP expansion,” the MTMPS said.

According to the Bangladesh Bureau of Statistics, nominal GDP grew by an average of 11.71 percent annually between FY21 and FY25. Over the same period, actual tax revenue expanded by an average of 11.4 percent, the Finance Division said.

“This persistent trend indicates that revenue collection is not keeping pace with economic growth, revealing the existence of substantial untapped revenue potential,” the Finance Division said.

The division suggested a strategic shift towards digital integration and administrative reforms to align revenue mobilisation more closely with the nation’s trajectory towards a trillion-dollar economy.

The MTMPS also compared Bangladesh’s performance with neighbouring and peer countries in South and Southeast Asia, highlighting the country’s relatively weak revenue mobilisation.

While comparable emerging economies have expanded fiscal buffers alongside economic growth, Bangladesh continues to operate with a narrow revenue base and low collection efficiency, the report said.