The government is planning a major fiscal overhaul in the upcoming national budget by introducing a direct wealth tax to replace the existing surcharge on high-net-worth individuals.

National Board of Revenue (NBR) officials describe the move as a structural shift aimed at reducing inequality and boosting revenue, arguing that the current surcharge system fails to effectively tax the rich and undermines the progressivity of the tax regime.

While the current system adds a few percentage points to the income tax of wealthy individuals, the new plan will collect taxes based on the actual value of assets.

Under the proposed framework, net wealth up to BDT 4 crore will remain tax-free, followed by a tiered rate of 0.25 per cent on the next BDT 2 crore, 0.50 per cent on the next BDT 5 crore, 0.75 per cent on the subsequent BDT 5 crore, and a 1 per cent levy on any remaining wealth.

For valuation purposes, land will be assessed at mouza rates, buildings at Public Works Department rates, gold at market prices, and shares at either cost or net asset value, whichever is higher.

This reform addresses structural weaknesses in the Income Tax Act 2023, where effective surcharge rates currently decline at higher wealth brackets and liabilities depend heavily on reported income, allowing those with low declared earnings to avoid significant tax.

Currently, Bangladesh collects surcharges up to 35 per cent of the payable income tax for wealthy individuals.

However, data reveals a regressive trend: for wealth between BDT 100 crore and BDT 200 crore, the effective surcharge rate is approximately 0.43 per cent, lower than the 0.54 per cent applied to the BDT 50–100 crore bracket.

In the 2025–26 tax year, while 30,804 taxpayers declared a combined net wealth of BDT 3,15,135 crore, surcharge collection stood at only around BDT 1,000 crore, or a mere 0.29 per cent of total wealth.

Wealth concentration remains high, with 13 taxpayers holding 2.69 per cent of total declared assets at an average of BDT 646 crore each, while 186 individuals with assets exceeding BDT 100 crore account for 12.12 per cent of total wealth.

A micro-analysis of 27 taxpayers suggests that actual asset values could be 89 per cent higher than declared, potentially raising revenue by up to 345 per cent compared to the current system.

In one extreme case, a taxpayer who currently has zero surcharge liability could face a wealth tax of nearly BDT 40 crore after revaluation.

Officials estimate the new framework could raise total revenue to about BDT 3,000 crore, generating an additional BDT 2,000 crore.

To support this, the government proposes enacting the Wealth Tax Act 2026, which would introduce an automated e-return-based assessment system, a permanent valuation committee, and a two-tier dispute resolution mechanism, with rules reviewed every five years.

Despite the revenue potential, experts have warned of significant implementation risks, including asset underreporting, capital flight, and the challenge of detecting undisclosed wealth within a weak data infrastructure.

They emphasize that the system requires a reliable asset database, robust digital tax administration, and strict enforcement.

SMAC Advisory Services Managing Director Snehasish Barua noted that "asset valuation is complex and could lead to disputes and higher administrative costs."

He further cautioned that the tax may "disproportionately affect compliant taxpayers while leaving parts of the informal sector outside the net," and warned that investors might be forced to liquidate assets, affecting the stock market and putting pressure on foreign exchange reserves.

Snehasish Barua also highlighted that "individuals with high-value assets but limited cash income may face liquidity stress, leading to forced sales and disruption to long-term investments."

Globally, countries remain divided on the efficacy of such taxes. France scrapped its system in 2018 citing investment concerns, while Germany, Sweden, and Denmark have also abolished similar levies due to administrative complexity and capital outflows.

In contrast, Norway maintains a wealth tax of about 0.85 per cent, and Switzerland applies canton-level levies ranging from 0.1 per cent to over 1 per cent.

Spain has recently revived its wealth tax with rates reaching 3 per cent, and Argentina introduced a temporary levy following the pandemic, illustrating the varied international approach to taxing concentrated wealth.