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The National Board of Revenue (NBR) has announced that manual selection of Value Added Tax (VAT) returns for auditing will remain suspended indefinitely, if necessary, to prevent any scope for corruption in file selection.
"The scrutiny would stay halted until the NBR develops an automated, risk-based audit system for VAT files," NBR Chairman Md Abdur Rahman Khan said on Tuesday during a dialogue titled "Reform in Corporate Tax and VAT: A Justice Perspective for NBR", organised by the Centre for Policy Dialogue (CPD) with support from Christian Aid Bangladesh at a city hotel.
Referring to the current VAT law, Mr Khan described it as a "paralysed" framework that could not be made fully efficient between 2012 and 2019 due to objections from businesses.
At the event, CPD released findings from a survey on corporate tax and VAT reforms. The NBR chief revealed that tax evasion in 2023 amounted to Tk 2.26 trillion, while total NBR collection in FY25 reached Tk 3.71 trillion.
He advocated a single VAT rate with a rebate mechanism to reduce the burden on taxpayers.
On the audit process, Mr Khan said not every taxpayer would face annual scrutiny. Instead, one-third of taxpayers who have never been audited would be randomly selected each year.
Speakers at the programme highlighted loopholes in the manual tax system, harassment by tax officials, and the regressivity of current tax policies.
CPD Research Director Dr Khondaker Golam Moazzem moderated the session, while Senior Research Associate Tamim Ahmed presented the keynote paper.
The NBR chief stressed that taxpayers are justified in expecting better utilisation of their tax money and transparency in its spending. "We have no alternatives but to raise tax collection to avert a debt trap."
He noted that the tax-to-GDP ratio declined to 6.6 per cent in FY25, according to IMF estimates.
Discussing NBR's structure, Mr Khan acknowledged limitations in the tax department and explained the need for bifurcation. He added that separating policy and implementation into two departments would allow both to function more efficiently.
On VAT refunds, he emphasised the need for automation to reduce delays and hassles. NBR Member (VAT) Syed Mushfequr Rahman noted that some companies showed positive cash flow in bank documents while still enjoying tax incentives.
Regarding the VAT rate, Mr Khan said, "Most countries have multiple rates, and the issue is less about the rate than about implementing an efficient rebate system."
CPD recommended maintaining corporate tax above 15 per cent, abolishing the minimum tax long-term, introducing conditional capital market incentives, and forming expert panels to assess tax exemptions.
It also proposed a joint committee with the Registrar of Joint Stock Companies (RJSC) and NBR and suggested that taxes collected for education and health be spent solely on those sectors.
Also, CPD called for withdrawing fossil fuel tax incentives and introducing an integrated tax system.
Industry voices echoed the need for reform, with LafargeHolcim Bangladesh CEO Mohammad Iqbal Chowdhury says taxpayers share responsibility for the bribery culture in the tax department, while legal economist MS Siddiqui highlighted the difficulties in challenging unjust tax claims.
Former NBR chairman Dr Muhammad Abdul Mazid and member Farid Hossain discussed the financial and structural requirements for integrating NBR functions through a digital platform and mentioned that a comprehensive reform proposal is being prepared with input from multiple stakeholders.
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