NBR seeks contractor data to plug revenue leakage in govt projects

Highlights:

• NBR launches probe into contractors' VAT and income tax payments
• CIC seeks detailed project and contractor information nationwide
• Investigation compares government payments against contractors' tax deposits
• Agencies across roads, railways, health and education are involved
• Tax evasion could trigger legal action against contractors
• Probe comes amid pressure to boost Bangladesh's revenue collection

The National Board of Revenue (NBR) has launched a major investigation into whether contractors working on government development projects are properly paying value-added tax (VAT) and income tax, amid allegations that the government is losing revenue from large-scale public spending.

As part of the investigation, the NBR's Central Intelligence Cell (CIC) is collecting detailed information on ongoing development projects and the contractors implementing them from ministries, divisions, departments, and directorates involved in major projects.

Recently, the CIC sent a letter to the chief engineer of the Roads and Highways Department (RHD), seeking information on its ongoing projects.

CIC Director General Mohammad Abdur Rakib asked for the names and types of projects, development partners, contractor companies, their business identification numbers (BINs) and tax identification numbers (TINs), total project costs, and project start dates.

Infograph: TBS

In the letter, it further stated that it had received confidential information suggesting that contractors working on ongoing development projects were not properly depositing government revenue.

The RHD has since instructed officials under its jurisdiction to provide the information urgently.

The intelligence cell has sought project- and contractor-specific information to verify the allegations and requested cooperation under Section 82 of the Value Added Tax and Supplementary Duty Act, 2012.

It has asked for details of project costs, contractor identities, and their BINs and TINs to compare government payments with the VAT and income tax deposited by the companies.

For each project, the information should also specify its funding source – whether it is government-funded, financed through foreign assistance, or funded through another source.

The exercise will give the CIC a clearer picture of the financial scale of each project and the contractors involved, enabling it to cross-check the information against the NBR's tax and VAT databases.

A CIC official, speaking on condition of anonymity, said the information would help determine how much money individual contractors had received from development projects and how much tax and VAT they had paid.

If discrepancies or evidence of tax evasion are found, the information could pave the way for legal action against the companies concerned, the official said.

Speaking on the matter, Dr Iftekharuzzaman, executive director of Transparency International Bangladesh, described the NBR initiative as an important, though belated, step.

"Although this was needed much earlier, if this initiative to verify contractors' VAT and tax payments is sufficiently robust, it could help identify ways to address and prevent Bangladesh's worrying tax-to-GDP ratio," he told TBS.

However, he said it remained to be seen whether the NBR would be willing to hold its own dishonest networks accountable if a proper investigation found tax, VAT and duty evasion by contractors and businesses, including possible collusion with corrupt elements within the NBR.

Investigation extends beyond roads

CIC sources said similar information had been sought from other government agencies. 

Letters requesting information have been sent to the ministries of education, health, local government, railways, shipping, water resources, and housing and public works, as well as the Local Government Engineering Department (LGED), Bangladesh Railway and their relevant agencies.

A significant share of the government's development budget is spent on roads, bridges, railways, local infrastructure, waterways, education, health and other construction projects. 

Contractors receive large payments for implementing these projects, making their tax and VAT compliance an important part of the NBR's revenue-monitoring.

The investigation comes as the NBR faces pressure to increase revenue collection. 

The revised Annual Development Programme (ADP) for the 2025-26 financial year stood at Tk208,935 crore. For 2026-27, the ADP has been set at Tk3 lakh crore.

According to Finance Minister Amir Khosru Mahmud Chowdhury's budget proposal, 33.70% of the total budget will go towards development spending, compared with 27.27% in the revised budget for the previous financial year.

In the first 11 months of the 2025-26 financial year, it collected Tk360,642 crore against a revised budget target of Tk442,084 crore for the period, leaving a shortfall of Tk81,442 crore, or 18.42%. Revenue collection nevertheless grew 10.02% from the same period a year earlier.

For 2026-27, the government has set a total revenue collection target of Tk6.95 lakh crore, of which the NBR is expected to collect Tk6.04 lakh crore.

The NBR's annual report said around 84% of income tax is collected through withholding and advance tax. Of this, around 22% comes from tax deducted at source when contractors' bills are paid.

The 22% figure, however, cannot be treated as the NBR's annual revenue from government development projects because not all transactions involving contracting and supply businesses are related to public development projects.

The CIC's current exercise is therefore aimed at establishing a project-level picture of contractors' earnings, tax and VAT registrations and payments, and determining whether the government is receiving the revenue due from its development spending.