NBR mulls developing a central app to boost VAT revenue

The National Board of Revenue is contemplating building a central application for the business entities to improve the value-added tax (VAT) collection.

The app is being considered for the businesses that remain outside the VAT net on the excuse of not being able to create their own VAT application.

“Those who are unable to prepare their own VAT calculation software, we are thinking of preparing it for them,” NBR Chairman Md Abdur Rahman Khan told a recent pre-budget meeting.

A senior official of the NBR said that for those who are saying that they are not big enough to invest in building separate VAT calculating software, the NBR would invest to prepare a central software for them.

“The government will develop and maintain the software, it will give access to the business which wanted to use the software,” he said.

He mentioned that the business entity will log in to the software with their user ID and password for putting their data in the system.

“The NBR will develop the central system locally, this will be a uniform system for all. Whichever business entity wants to use it can have their access,” the NBR official said.

He said that after putting every day's input in the system, the VAT return for the specific business entity will be prepared.

“There is no need to appoint a separate accountant,” he said.

Talking about the big business entities who have their own accounting system, the NBR official mentioned that it would be connected with the iBAS system and their VAT returns will also be prepared automatically and they would be able to make their payment.

“They will also get their VAT credit automatically; there will be no problem for this purpose,” he said.

The NBR is thinking about developing this system.

The NBR chairman referred to the move in several pre-budget meetings.

“This might take some time, but it is not a tough job.... if the country wants it can invest Tk 10,000 crore for this system development, and everything will be easy whenever all systems will be digitised,” he said.

Revenue collection, especially the VAT collection, has been having trouble for a long time due to the non-compliance issue of the big and small business entities.

According to the NBR-provided data, the target for VAT collection from the local level was Tk 69103.63 crore, while the collection was Tk 50,884.77 crore till February. The VAT collection was Tk 53,426.35 crore in February 2024. It means the growth is negative in this sector.

In January this year, the government implemented significant increases in value-added tax (VAT) and supplementary duties on over 100 goods and services. This mid-fiscal year adjustment aims to bolster revenue collection and address a substantial budget deficit.

The NBR reported a revenue shortfall of approximately Tk 58,242 crore over the past eight months, with actual collections totaling over Tk 2,21,817 crore against a target of Tk 2,80,059 crore.

The VAT hikes encompass a diverse range of products and services, including mobile phone usage, internet services, clothing, and dining at restaurants. But it stepped back from increasing VAT on various products.

These tax adjustments align with recommendations from the International Monetary Fund (IMF), which, as part of a $4.7 billion loan agreement, required the government to raise an additional Tk 12,000 crore in revenue for the 2024-25 fiscal year. The IMF emphasised the need to enhance Bangladesh’s tax-GDP ratio, which is below eight percent at present.

The NBR also gave tax exemptions on essential items like rice, potatoes, onions, sugar, eggs, dates, edible oil, and pesticides to stabilise market prices.

Despite these measures, the effectiveness of the VAT in achieving revenue targets remains uncertain, especially given the ongoing economic challenges and high inflation affecting consumer purchasing power, experts say.