The 6.5% trap: how a national fiscal data centre can save our economy

Bangladesh currently languishes at the bottom of the global ranking with a mere 6.5 percent tax-to-GDP ratio. For a nation whose citizens hold profound aspirations for development, peace, and prosperity, this chronic revenue deficit poses an existential threat to future growth.

To mobilise internal resources effectively, the National Board of Revenue (NBR) requires a radical technological overhaul. Specifically, Bangladesh needs the NBR to spearhead the development of a National Fiscal Data Centre (NFDC)—a centralised intelligence hub providing real-time access to financial information across all governance systems.

At present, information asymmetry is deeply embedded in the institutional design of the state. Within the NBR itself, the three core wings operate in isolated silos, lacking internal data integration.

Beyond the NBR, the landscape is littered with multiple, non-interoperable identifiers: TIN, BIN, NID, incorporation numbers, BO accounts, land records, holding numbers, and trade licences.

This severe fragmentation creates a lucrative window for “identity arbitrage.” It allows tax evaders to strategically distribute their economic activities across disjointed identities, effortlessly escaping consolidated tax visibility.

In terms of revenue collection, this structural flaw leaves the state behaving like a crying baby while the food flies right by.

To close these gaps permanently, Bangladesh urgently needs to implement a Unified Identification Number (UIN) system for all natural and artificial persons. This single account would consolidate a person’s essential information and serve state departments, courts, and businesses alike.

To operationalise this, the state must establish the NFDC, designed to seamlessly integrate data from a vast array of institutions. This includes the NBR, Bangladesh Bank, scheduled banks, the Registrar of Joint Stock Companies (RJSC), the CDBL, capital market intermediaries, the BRTA, RAJUK, land registries, city corporations, and all utility and telecommunication providers.

By linking the UIN to the data the state already holds, taxpayer profiles can be consolidated into a single, verifiable source of truth. The primary objective of the NFDC is to create an interoperable fiscal ecosystem linking identity, assets, liabilities, transactions, income, and expenditures.

This would revolutionise compliance. By automating reconciliation and facilitating pre-filled tax returns, compliance costs would plummet while voluntary compliance would soar.

Most importantly, it would transform the state’s revenue administration from a reactive enforcement mechanism into a proactive, predictive, and intelligence-driven system, shifting taxpayers from self-declaring entities to reviewing and validating ones.

Robust governance is critical to the NFDC’s success. It should be managed by a high-level committee chaired by the finance minister, with the NBR’s E-tax Management Unit serving as the member secretary. The committee should include the central bank governor and relevant department chiefs, and provide quarterly briefings to the prime minister.

Furthermore, the Income Tax Act, 2023 must be amended to include exclusive legal provisions detailing the NFDC’s establishment and operations. Success must be rigorously measured against benchmarks such as API readiness, data integration volume, property record digitisation, and cybersecurity audits.

Operationally, the NFDC must prioritise interoperability over absolute centralisation. Data should remain securely with the originating authorities but be accessible via authenticated interfaces.

Prescribed transactions, such as property registrations or corporate ownership changes, must trigger automatic reporting to the NFDC. A stringent legal regime is required to ensure inter-agency cooperation, moving past the bureaucratic blame game and focusing on building the digital backbone of the nation.

Yet, even with an NFDC capturing formal assets, a critical blind spot remains: real estate. While interest, dividends, and capital gains can be traced through system interoperability, informal rental income is easily hidden. Integrating this informal economy into the digital payment ecosystem will take time.

Historically, tax authorities have relied on presumptive assessments to evaluate unobserved magnitudes like real estate values and informal rents. Unfortunately, these estimates often rely on the arbitrary whims of tax officials, breeding inefficiency and disputes.

To eliminate this guesswork immediately, we must develop a comprehensive Property Data Bank (PDB). Operating as a formal, algorithmic depository, the PDB would analyse property records, track market value fluctuations linked to a UIN, and incorporate local market surveys.

If declared values fall within the PDB’s reliable, data-backed ranges, the arbitrary guesswork of the past is eliminated.

This initiative requires the cooperation of municipal authorities and the mandatory digitisation of all holding taxes and rent payments.

Through seamless API integration, the PDB would exchange information with city corporations and the NFDC, unmasking the chain of holding companies and exposing the true beneficial owners behind anonymous transactions.

As the central bank’s cashless initiatives gain momentum, the construction of this database will rapidly accelerate. Ultimately, this will transition Bangladesh away from presumptive data and firmly into an era of transparent, real-time financial governance.

The writer is a chartered accountant and a partner at Snehasish Mahmud & Co. He can be reached at snehasish@smac-bd.com