Dhaka: National Board of Revenue (NBR) Chairman Md Abdur Rahman Khan today emphasized the urgent need to expand Bangladesh’s VAT and income tax base. This move aims to reduce reliance on import-based revenue, strengthen fiscal stability, and support the nation’s development goals and essential public services.
According to Bangladesh Sangbad Sangstha, the NBR chief communicated these views during a ‘Meet the Press’ event at the Revenue Board Building in the capital, preceding VAT Day and VAT Week. He highlighted that Bangladesh’s progress and administrative functions are heavily dependent on state-collected revenue. Historically, the country relied on import duties, with about 90 percent of revenue collected at the import stage post-independence. However, VAT and income tax have since become central to domestic resource mobilization, with VAT contributing 38 percent of total revenue in the last fiscal year.
The chairman noted concerns over the low number of VAT-registered entities, which stands at approximately 644,000, much less than the actual number of businesses in Bangladesh. Despite a reduced VAT registration threshold, registrations have not increased proportionately. As part of VAT Day and VAT Week activities, the NBR aims to register at least 100,000 new businesses in December.
Rahman Khan acknowledged the complexity of VAT despite its conceptual simplicity, tracing issues back to the original 1991 VAT law and the implementation of the 2012 law. He advocated for a single VAT rate and a fully functional input credit system across production and distribution stages to ease automation and fair competition.
He clarified that businesses collect VAT on behalf of the government, with the ultimate burden on consumers, and pointed to compliance distortions affecting market fairness. NBR plans to introduce sector-specific VAT systems to aid small businesses in compliance, bearing system development and maintenance costs.
The chairman also discussed modernizing VAT and income tax audits, shifting towards digital, risk-based audits, and automating VAT refunds. This includes direct payments to taxpayers’ bank accounts, with income tax refunds to follow suit.
Rahman Khan reassured that NBR focuses on preventing revenue leakages rather than imposing pressure on businesses. Strengthened intelligence units have recovered significant evaded revenue, with updated figures forthcoming.
He acknowledged challenges in revenue collection, including weak corporate tax receipts, reduced capital expenditure, slower project implementation, and financial stress on major business groups. Despite these issues, revenue growth remained above 20 percent in the first quarter and is expected to stay above 16 percent by November’s end.
The chairman highlighted Bangladesh’s low tax-GDP ratio and the need for research to identify untaxed economic segments. With impending LDC graduation, a stronger domestic tax base becomes crucial as import duties decline due to global trade obligations.
He announced the imminent start of a World Bank-funded automation project for NBR, aiming to automate all internal processes and better utilize existing systems like ASYCUDA World. He concluded by urging business and media cooperation to simplify tax laws, expand the tax base, and build a fairer revenue system.