NBR Chairman Md Abdur Rahman Khan. File Photo

DHAKA, Dec 9, 2025 (BSS) - National Board of Revenue (NBR) Chairman Md Abdur Rahman Khan today underscored the urgent need to expand the country's VAT and income tax base to reduce reliance on import-based revenue, strengthen fiscal stability, and support Bangladesh's development ambitions. 

"Development goals and essential public services can't be delivered unless adequate revenue is mobilised," he said. 

The NBR chief said this while speaking at a 'Meet the Press' event ahead of VAT Day and VAT Week, held at the Revenue Board Building in the capital.

He said Bangladesh's progress and day-to-day administrative functions depend heavily on revenue collected by the state. 

NBR chairman noted that Bangladesh relied overwhelmingly on import duties in the early years of independence, with nearly 90 percent of revenue collected at the import stage. 
 
He said such a structure places the same tax burden on the rich and poor alike and is neither sustainable nor equitable. Over time, VAT and income tax have emerged as the principal pillars of domestic resource mobilisation, with VAT alone contributing 38 percent of total revenue in the last fiscal year. 

He added VAT receipts posted strong growth in the first quarter of the current fiscal year before slowing slightly in October and November. Even so, VAT collections grew by 22 percent in the July-November period, demonstrating significant potential for further expansion. 

However, Rahman expressed concern that only about 644,000 entities are registered for VAT, a figure far below the actual number of businesses operating across the country. 

He said the VAT registration threshold was reduced last year from Taka 3 crore to Taka 50 lakh in annual turnover, meaning that nearly all businesses should now fall within the VAT net. 

"Yet registrations have not increased proportionately, prompting NBR to place VAT registration at the centre of this year's VAT Day and VAT Week activities. The authority aims to bring at least 100,000 new businesses under the VAT system during December." 

The NBR chairman acknowledged that VAT, despite being conceptually simple, has become increasingly complex over the years. 

He traced the problem back to the original VAT law of 1991 and said that even the simplified 2012 VAT law became subject to compromises during its implementation in 2019, reintroducing many complications. 

He reiterated the need to establish a single VAT rate across the board and to enforce a fully functional input credit system at every stage of production and distribution. 

A unified rate, he said, would make automation easier and eliminate distortions that undermine fair competition. 

Abdur Rahman Khan highlighted a common misconception that businesses "pay" VAT. He said businesses merely collect VAT on behalf of the government, while the final burden ultimately falls on consumers. Distortions in compliance, he added, create an uneven playing field in the market. 

To ease compliance for small and cottage businesses, NBR is planning sector-specific VAT systems that will allow users to record receipts and payments and automatically generate VAT returns. 

He said NBR will bear all system development and maintenance costs, including hosting and cloud services, to support smaller businesses that cannot afford specialised software or consultants. 

Rahman Khan also emphasised ongoing efforts to modernise VAT and income tax audits. The manual audit selection process has been suspended as part of a shift toward digital, risk-based audits. 

Work is also underway to fully automate VAT refunds, enabling payments to be transferred directly to taxpayers' bank accounts. Income tax refunds will be brought under a similar automated model in the future.

The NBR chairman stressed that the authority is focused on stopping revenue leakages rather than imposing pressure or harassment. 

He said various intelligence units - including VAT, customs, central, and tax intelligence agencies - have strengthened their operations, allowing NBR to recover significant amounts of evaded revenue. 

Updated figures will be shared soon, he added. 

Khan acknowledged several challenges affecting revenue collection this year, including weak corporate tax receipts from the banking sector, reduced capital expenditure due to a contractionary budget, and slower implementation of development projects. Major business groups have also faced financial stress, he said. 

Despite these headwinds, overall revenue growth remained above 20 percent in the first quarter, though it may ease slightly due to lower customs duty collections. Even so, he expects growth to stay above 16 percent by the end of November and hopes to close the fiscal year with around 20 percent revenue growth. 

The NBR Chairman said Bangladesh's tax-GDP ratio remains low, and more research is needed to identify why certain segments of the economy remain untaxed. As the country prepares for LDC graduation, import duties will inevitably decline due to global trade obligations, making a stronger domestic tax base essential. 

He said the long-delayed, World Bank-funded automation project for NBR will soon begin, and the authority intends to automate all of its internal processes under the initiative. 

He also highlighted the need to better utilise existing automated systems such as ASYCUDA World, which is used globally but has not been fully leveraged in Bangladesh. 

The NBR chairman concluded by urging for cooperation from businesses and the media to help simplify tax laws, expand the tax base, strengthen compliance, and build a fairer and more efficient revenue system.