Budget for FY 2025–26Top state officials to lose special tax exemptions

Bangladesh’s tax-to-GDP ratio remains one of the weakest globally, despite significant potential for revenue collection. Widespread inequality in the income tax system has long enabled high-ranking government officials to avoid paying taxes on large portions of their earnings, while ordinary citizens are taxed on nearly all income sources. This imbalance has discouraged tax compliance among the general public.

Now, the interim government led by Chief Adviser Dr Muhammad Yunus is moving to correct this long-standing disparity. The upcoming national budget for fiscal year 2025–26 will eliminate special income tax exemptions for state elites, pending final approval from Dr Yunus. This policy shift has already received in-principle endorsement from Financial Adviser Dr Salehuddin Ahmed.

Sources at the National Board of Revenue (NBR) confirm that under current SROs (Statutory Regulatory Orders), the Prime Minister, Speaker, Ministers, Deputy Speaker, State and Deputy Ministers, advisers of ministerial rank, and Members of Parliament are exempt from paying tax on allowances, festival bonuses, and other non-salary benefits. A similar order exempts the Chief Justice and judges of the Supreme Court’s Appellate and High Court Divisions.

Additionally, under the 2023 Income Tax Act, government officials are exempt from tax on pensions, gratuities, recognised provident and retirement funds, voluntary retirement packages, and interest from pensioners’ savings certificates. They pay tax only on basic salary and bonuses. In contrast, private sector employees must pay tax on nearly all forms of income.

The NBR now plans to end this discriminatory policy. Once the special exemptions are withdrawn, even the Prime Minister—or, in the current context, the Chief Adviser—will pay income tax like any ordinary citizen.

Speaking to reporters, Dr Mohammad Mohiuddin, Additional Secretary of the Legislative and Parliamentary Affairs Division, confirmed: “The Chief Adviser enjoys all the privileges and status of the Prime Minister. Therefore, any changes to those benefits would apply equally to the Chief Adviser.”

The move has been widely welcomed by citizens. Many argue that public officials are servants of the people and should not enjoy undue tax privileges. Previous efforts to address this income tax inequality were ignored by earlier administrations. People now hope that the Yunus government’s decision will prove transformative.

Barrister Jyotirmoy Barua said, “when a law is enacted, it must apply equally to all. The previous government created a system of political favouritism. This is the right time to reverse such policies. This government has no vested interests, so abolishing these benefits is entirely justified.”

Economist Dr Fahmida Khatun added, “Everyone should pay tax equally. Government salaries and benefits come from public funds. It is unfair for officials to claim exemptions while ordinary citizens bear the burden. Policy inequality—one rule for the government, another for the public—is deeply unjust.”

Dr Syed Aminul Karim said, “a country cannot have two sets of tax laws. This is discriminatory and must be corrected now. For example, provident fund income is taxed for private employees but not for government staff. This distinction is indefensible when both groups are citizens of the same state.”

The NBR currently provides permanent tax exemptions across sectors such as investment, social welfare, sports, development, public health, education, the Liberation War, literature, politics, and constitutional posts.

However, experts suggest a time-bound approach for most sectors while revoking exemptions entirely in select areas to ensure fairness and improve revenue collection.

Notably, during the 2023–24 fiscal year budget planning, senior officials in the NBR’s Income Tax Policy Wing proposed eliminating permanent tax exemptions for holders of constitutional positions and political party incomes. The then-chairman supported the plan. However, former Prime Minister Sheikh Hasina ultimately scrapped the proposal to appease the bureaucracy and judiciary.