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The gap became more pronounced in 2025. Bhutan recorded a revenue-to-GDP ratio of 27.8 percent, followed by India at 21 percent, Myanmar at 20.3 percent, Nepal at 20 percent and Vietnam at 19.9 percent.

Bangladesh’s ratio stood at just 7.9 percent that year.

“This persistently low taxation level indicates that structural reform in taxation policy and administration is required so that taxes can be more efficiently collected from potential revenue sources.”

The MTMPS said a large traditional agricultural sector and an extensive informal economy outside the formal tax net continue to pose major challenges to effective tax administration.

“Also, the absence of tax administration-wide digitalisation and low tax morale make it very difficult for the tax administration to perform effectively.”

The report noted that revenue-to-GDP ratios in Pakistan, Cambodia and Sri Lanka also exceed Bangladesh’s, underscoring the scope for greater revenue mobilisation and the need to tap underutilised fiscal resources.

The MTMPS highlighted “a significant and persistent gap” between the number of Taxpayer Identification Number (TIN) holders and actual income tax return filings.

Although the number of registered TIN holders rose to 1.2 crore in FY25, compliance remained weak. Only 46 lakh returns were filed, meaning nearly 62 percent of TIN holders failed to submit returns, resulting in a record compliance gap of 74 lakh taxpayers.

However, a positive shift is emerging in FY26, as mandatory online filing has driven a 24.3 percent increase in submissions as of March. The trend suggests that while systemic inertia persists, digital enforcement is becoming a key driver of improved compliance and a more disciplined tax culture.

The National Board of Revenue currently generates 88 percent of total tax revenue. Indirect taxes -- including VAT, supplementary duty, customs duty and other levies -- account for 65.6 percent of the NBR’s collections.

Direct taxes, led primarily by income tax, contribute the remaining 34.4 percent, underscoring the tax system’s continued reliance on consumption-based indirect taxation.