NBR plans data-driven system to track taxpayers' income, spending, assets

Infographic: TBS

The National Board of Revenue (NBR) plans to introduce a data-driven system to identify discrepancies between taxpayers' declared income and their actual spending and assets, with the aim of detecting tax evasion and boosting revenue collection.

The system will have an integrated profile for every taxpayer. It will compare declared income with spending on credit cards, education, healthcare, foreign travel, bank transactions, vehicle purchase, investments in shares, and other movable and immovable assets.

The system will automatically assess whether a taxpayer's income, expenditure and assets are consistent. Significant discrepancies will trigger a higher-risk classification.

The NBR plans to complete integrated taxpayer profiles and establish an income tax data warehouse within two to three years. It will also profile high-net-worth individuals to assess whether their tax payments are commensurate with their economic capacity.

NBR officials yesterday presented separate plans of its income tax, VAT and customs wings to increase revenue at a meeting of the Parliamentary Standing Committee on the Ministry of Finance. The plans were outlined in the meeting documents.

The NBR wings presented plans covering six timeframes from the next three months to five years.

The NBR collected Tk4,15,476 crore in revenue in the last fiscal year. The BNP government has set a revenue collection target of Tk6,04,000 crore for the current fiscal year.

The plans aim to raise Bangladesh's tax-to-GDP ratio from 6.8% by two percentage points in the short term, to 10% of GDP in the medium term and 15% by 2035.

Customs attaché post at missions abroad to curb laundering

To tackle the risks of commercial fraud, revenue leakage and money laundering through trade mis-invoicing, the NBR has also proposed creating customs attaché posts at Bangladesh missions in major trading partner countries.

The proposed attachés would help collect information on the origin of imported goods, exporter details, commercial transactions and relevant foreign companies, as domestic data alone is insufficient to detect such risks.

What will be in the taxpayer profiles

The automated income and asset profiles will include taxpayers' declared income and tax payments, bank transactions, immovable property, company ownership, stock market investments, import and export volumes, withholding tax, foreign travel, bank accounts and high-value transactions, property and flat purchases and sales, vehicle ownership, high-value utility connections, rental income, and spending on education and healthcare.

For example, the NBR said a taxpayer may declare an annual income of Tk12 lakh while having Tk1.2 crore in bank deposits, purchasing a vehicle worth Tk50 lakh and land worth Tk1 crore, and travelling abroad five times a year. 

Such discrepancies will be automatically flagged by the National Income Tax Data Matching System, enabling data-driven enforcement.

Curbing corporate income tax evasion

To curb corporate income tax evasion, the NBR has also proposed a system-based risk management mechanism to scrutinise specific financial indicators. 

These include turnover versus declared profit, gross profit ratio, related-party transactions, interest expenses, management fees, royalties, commissions, depreciation, bad debts, related-party loans, directors' remuneration, import value versus domestic sales, and VAT turnover versus income tax turnover.

The NBR told the standing committee that it is currently developing industry benchmarks for companies in the same sector to help identify potential corporate income tax evasion.

Active taxpayer registry in major cities

The NBR also plans to launch property-based income tax compliance programmes in major cities to increase revenue from houses, flats and commercial properties.

It wants to cleanse its TIN database and create an active taxpayer registry. Those who regularly file returns and pay taxes will be classified as active taxpayers, while those who file returns but do not pay taxes will be placed in a separate category.

The NBR will also maintain separate lists of TIN holders who do not file returns, those who have not filed returns for an extended period, and individuals engaged in economic activities but without TINs.

An annual target will be set for growth in the number of active taxpayers, with the number of new active taxpayers created by each tax office included as a key performance indicator.

The NBR also plans to establish an income tax debt management system to improve the collection of outstanding taxes.

To reduce unnecessary direct contact between taxpayers and tax officials, the NBR will gradually introduce faceless assessments and audits. Tax officials will conduct assessments through a digital platform.

Integrated taxpayer accounts in 3 years

Within the next three months, the NBR will clean and classify its TIN database, prepare a list of taxpayers with the highest outstanding income tax liabilities, and identify high-risk companies, and high-net-worth individuals.

Within three to six months, it will conduct awareness campaigns to encourage taxpayers to file returns, make its High-Net-Worth Individual Unit operational, and pilot a central risk-based audit system.

Within six to 12 months, the NBR will integrate taxpayers' bank, property, vehicle and company information and pilot an automated income and asset profiling system. It will also develop electronic audit selection and an automated withholding tax ledger.

Within one to two years, the NBR plans to introduce pre-filled tax returns, nationwide risk-based audits, faceless assessments and automated refunds. It will also strengthen medium-taxpayer segmentation and build capacity in international taxation pricing.

Within two to three years, the NBR plans to establish integrated taxpayer accounts, full third-party data matching, an income tax data warehouse, automated detection of income-asset mismatches, tax gap estimation and advanced analytics-based enforcement.

Speed up auctions to ease port congestion

Customs plans to expedite auctions of uncleared and confiscated goods at Chattogram and other ports to ease congestion and boost revenue collection.

The NBR said more than Tk25,000 crore in outstanding dues is recoverable from government and private organisations. It also plans to expedite the disposal of pending cases against bonded facilities.

The NBR proposed further rationalising tax exemptions in the coming years. It said around Tk77,160 crore in tax exemptions were granted in FY26.

To address weak compliance, inadequate automation, mis-invoicing and money laundering, the NBR plans to introduce tax gap analysis, integrated automation and data integration, and AI- and machine learning-based risk management.

Attempts to contact NBR acting Chairman Ahsan Habib for comment went unanswered.

The meeting was chaired by committee chairman Mushfiqur Rahman and attended by Finance Minister Amir Khosru Mahmud Chowdhury, and other committee members. 

Senior officials from the Finance Ministry, Financial Institutions Division, Economic Relations Division, NBR and Parliament Secretariat also attended the meeting.