Bangladesh’s parliament will assume sole authority over tax exemptions from the next fiscal year, ending discretionary powers held by the finance ministry and the National Board of Revenue (NBR).

A new “Tax Exemption Policy and Management Framework,” released on Wednesday, mandates that all exemptions—covering income tax, VAT, and duties—must be passed through parliamentary legislation. No ministry or agency, including the NBR, will retain independent authority to issue waivers.

The policy, set to be implemented with the 2025–26 national budget, permits temporary exemptions only when parliament is not in session. These must receive cabinet approval and will be valid for one year.

This shift aligns with conditions under Bangladesh’s $4.7 billion loan agreement with the International Monetary Fund, which calls for stricter fiscal oversight and greater transparency in revenue management.

A five-year cap will now apply to all newly issued exemptions, aiming to curb indefinite waivers criticised for eroding tax fairness. The policy also introduces annual tax expenditure reports to be tabled in parliament, with at least 20% of exemptions reviewed yearly.

The framework seeks to simplify the tax system, improve accountability, and rationalise existing exemptions. Experts have long warned that the absence of a legal structure around tax breaks allowed powerful individuals and sectors to benefit disproportionately.

NBR estimates show tax exemptions reached Tk 163,000 crore in fiscal year 2024–25, up 11% from the previous year and equivalent to 2.91% of GDP.