Revenue hit by business slump and corruption

In the last fiscal year (2024–25), VAT collection growth from large taxpayers dropped to 4.47 percent, creating pressure on overall revenue earnings. Officials said the decline was mainly due to the slowdown in business affecting major companies.

A senior official at the National Board of Revenue (NBR) noted that corruption was another key factor behind weak VAT collection.

He said, “To raise Bangladesh’s relatively low tax-to-GDP ratio, administrative reforms and procedural changes are urgently needed.”

According to data, the Large Taxpayers Unit (LTU) of the VAT Wing collected Tk 76,953 crore in VAT in the last fiscal year, slightly higher than Tk 73,660 crore in the previous year.

However, collections fell short of the target by around Tk 8,337 crore. Out of 34 sectors, 25 saw VAT growth while 9 recorded declines.

These include the Bangladesh Telecommunication Regulatory Commission (BTRC), five-star hotels, ceramic tiles, telecom equipment, food products, packaging materials, paper, water supply, and soap manufacturers.

Despite the economic downturn, VAT growth from LTU remained above 4 percent. But overall, NBR’s revenue collection grew by only 2.23 percent.

The tobacco industry remained the single largest contributor. British American Tobacco Bangladesh paid Tk 36,761 crore in VAT last fiscal year—Tk 1,245 crore higher than in FY 2023–24.

The second-largest contributors were the four mobile phone operators, which paid Tk 11,975 crore—an increase of nearly 10 percent. The gas sector contributed Tk 11,834 crore, up 4 percent, while 17 commercial banks paid Tk 3,868 crore—5.78 percent higher than the previous year.

Former VAT Wing member and current member of the NBR Reform Advisory Committee, Farid Hossain, said, “For a long time, VAT collection from the LTU has been heavily dependent on the tobacco sector. Even a slight decline in tobacco revenues has a negative impact on overall revenue. This is why effort-based VAT collection must be emphasized.”

He added, “Our economy has the potential to raise the tax-to-GDP ratio to 16 percent. Yet it remains stuck between 7 and 8 percent. Without curbing corruption, this growth is not possible.”