The journey to raise domestic revenues is challenging, but it is one that Bangladesh needs to undertake to secure sufficient resources to invest in its people and their future. Bangladesh stands at a critical juncture in its development journey. Following decades of sustained growth and poverty reduction, growth has slowed, and its demographic dividends present only a narrow window of opportunity to transition to an upper-middle-income economy by the next decade. The country's very low domestic revenue collection poses a significant challenge. Bangladesh's tax-to-GDP ratio was just 6.7% of GDP in FY25, which is less than half of the 15% considered the minimum necessary to finance essential development needs. Such low revenues can significantly lower the country's development trajectory by limiting investments in education, health and infrastructure. Bangladesh needs to generate more domestic revenue for its economy to grow, diversify and create jobs. What explains the low domestic revenues in Bangladesh? Tax rates in Bangladesh are comparable to, and in some cases higher than, peer countries. The real problem lies in a complex and distortionary tax system characterised by multiple tax rates and large and regressive exemptions on VAT and income taxes.