BUILD organised a dialogue titled “Policy reform requirements for non-adjustable TDS” on 17 September 2025 at the DCCI Auditorium, Dhaka. Md Abdur Rahman Khan, Chairman of the National Board of Revenue (NBR), attended as the chief guest, while Dr Mohammad Abu Yusuf, Secretary, Ministry of Social Welfare, was present as a special guest.
The event aimed to recommend practical reforms and present an actionable roadmap to simplify the TDS refund system, thereby enhancing transparency, efficiency, and fairness for taxpayers.
In his address, NBR Chairman Md Abdur Rahman Khan noted that while TDS is an effective global practice, its implementation in Bangladesh has been constrained by operational inefficiencies, resulting in delays in adjustments. He mentioned that the analytical tools within the ASYCUDA system are not being fully utilised. To address these issues, he stated that the NBR is gradually reducing TDS rates and is likely to automate the TDS refund system in the coming months. He further observed that, in some cases, advance income tax (AIT) rates stand as high as 20 per cent—nearly equivalent to the corporate tax rate. He emphasised the need for urgent research to develop benchmarks for rationalising and making TDS rates sector-specific, while ensuring tax justice without compromising the tax-to-GDP ratio.
Dr Mohammad Abu Yusuf, Secretary, Ministry of Social Welfare, highlighted policy gaps and inconsistencies, citing international examples of more efficient tax refund systems. He remarked that delays in receiving refunds block working capital and reduce the profitability of small enterprises. He suggested that integrating the informal economy into the tax system could significantly enhance Bangladesh’s tax-to-GDP ratio.
Taskeen Ahmed, President of the Dhaka Chamber of Commerce and Industry (DCCI), expressed his organisation’s interest in collaborating with BUILD to simplify the TDS process.
Abul Kasem Khan, Chairperson of BUILD, described the current refund system as “very complicated”, noting that some businesses are forced to maintain two separate accounting systems. He attributed the low tax-to-GDP ratio to a cumbersome tax structure and stressed that without mutual confidence between the public and private sectors, no substantial improvement could be achieved.
In the keynote presentation, Dr Wasel Bin Shadat, Research Director at BUILD, explained that the non-adjustable nature of tax deducted at source (TDS) under Section 163 of the Income Tax Act 2023 often acts as a de facto minimum tax. This creates significant liquidity constraints for businesses and contributes to a low share of direct tax revenue—currently around 33 per cent of total NBR revenue. He added that the existing refund process is slow and lacks a digital pathway, leading to substantial delays.
BUILD’s research, presented by Dr Shadat, revealed that policy inconsistency, minimum tax and supplementary duty (SD) have raised the total tax incidence (TTI) in the beverage sector from 42 per cent to 53.95 per cent over the past five years. SD alone doubled from 15 per cent in 2021 to 30 per cent in 2024—the highest rate in the region. The minimum income tax also rose fivefold from 0.6 per cent to 3 per cent in a single year. As a result, the sector’s revenue fell by more than 20 per cent year-on-year due to an increased tax burden.
His presentation outlined a three-phase reform roadmap:
- Immediate Action
Introduce a board-prescribed refund form (IT-RFD-01) and issue a circular clarifying the distinction between adjustable and final withholdings. - Medium-Term Goals
Develop a fully automated TDS e-reporting and e-refund portal, incorporating risk-based verification to process low-risk claims within 30 working days. - Long-Term Strategy
Phase out the broad minimum-tax treatment under Section 163 by recalibrating TDS rates based on sector profitability and broadening the tax base to secure stable revenue collection.
Ali Zaman, President of the SME Owners Association, noted that while SMEs previously received TDS refunds by cheque, the current process has become significantly more complex.
Md Hafizur Rahman, former Director General of the WTO Cell, MoC, underscored the importance of tax justice and proposed differentiated tax structures to accommodate the diversity of taxpayers.
Shadab Ahmed Khan, Managing Director of Coca-Cola Bangladesh Beverages, emphasised that although Bangladesh remains an attractive destination for investors, complex tax policies act as a deterrent. He observed that the TTI in the beverage sector has risen from 42 per cent in 2016 to 54 per cent owing to such inconsistencies.
Snehasish Barua FCA, Partner at Snehasish Mahmud and Company, referred to the Finance Ordinance, which indicates the NBR’s intention to gradually reduce TDS rates. He stated that the refund mechanism could be improved through new rules currently awaiting approval, which would minimise non-adjustability. He further noted that growth in tax revenue depends on stronger value added tax (VAT) performance.
Dr Muhammad Abdul Mazid, former Chairman of the NBR, urged both the NBR and taxpayers to act sincerely to raise the tax-to-GDP ratio. He suggested that large business associations allocate at least 2 per cent of their revenue to research.
A. K. M. Badiul Alam, Member (Income Tax Policy) at the NBR, commended the refund workflow proposed by the keynote speaker.
In her closing remarks, Ferdaus Ara Begum, CEO of BUILD, highlighted a key trend: the share of TDS in total income-tax revenue has increased from 84.6 per cent to 87.4 per cent, while TDS refunds have fallen from 0.35 per cent to 0.24 per cent of total TDS collected. She observed that this decline persists despite clear policy provisions for refunding adjustable TDS with 10 per cent interest and direct bank transfers of excess tax payments to beneficiaries.
Other participants in the open discussion included Md Abdul Matin FCMA, Managing Director, Security 360 Limited; Dr A. K. M. Atiqul Haque, Joint Secretary, Ministry of Finance (MoF); Alimul Ahsan Chowdhury, President, Agricultural Machinery Manufacturers’ Association Bangladesh; Shankar Kumar Roy, Executive Director, Bangladesh Cement Manufacturers Association; and M. S. Siddiqui, CEO, Bangla Chemical.