VAT coverage to be expanded in next budget: NBR chairman

The government will expand the scope of value-added tax (VAT) in the upcoming fiscal year's budget and take measures to prevent the sale of cigarettes and other packaged goods without proper tax and VAT payment, National Board of Revenue (NBR) Chairman Abdur Rahman Khan said.

He also said the government will coordinate NBR data with the Registrar of Joint Stock Companies and Firms (RJSC) to identify companies that are not paying taxes, and cancel Taxpayer Identification Numbers (TINs) of deceased individuals and those with no taxable income.

The remarks were made at a pre-budget discussion organised by the Ministry of Finance with the Economic Reporters Forum (ERF) yesterday (25 April).

Finance Minister Amir Khosru Mahmud Chowdhury, Bangladesh Bank Governor Mostakur Rahman, Finance Secretary Dr Khairuzzaman Mozumder, and senior officials from the Financial Institutions Division, Economic Relations Division and Planning Ministry were present at the meeting.

The finance minister said the government aims to increase the tax-to-GDP ratio, but doing so remains difficult under current economic conditions.

"Due to a 40% depreciation of the taka and 14% inflation, industries are incurring losses. They require recapitalisation," he said, adding that he has informed the IMF and World Bank that increasing the tax-GDP ratio in the current context would be very challenging.

He also said allocations for the education and health sectors will be increased in the next budget. "If the economic situation were better and there were no Iran war, allocations could have been higher," he added.

The minister said the budget will prioritise the SME sector and startups. He also noted that initiatives have been taken to explore gas fields to ensure energy security, while discussions are ongoing to import hydropower from Nepal.

Referring to the restructuring of the NBR, he said, "The interim government left the work half done. We will complete and implement it properly. The policy division will be structured in a way that reflects public concerns."

On expanding VAT coverage, the NBR chairman said, "Out of the existing 1.28 crore TIN holders, those who are deceased or have no taxable income will be cancelled. Those who remain will receive automatic notices if they fail to submit returns."

Noting that the number of VAT payers currently stands at around 800,000, he said, "Initiatives will be taken in the next budget to curb widespread evasion. Cigarette packets will carry QR codes so that any citizen can scan them using a smartphone to verify whether VAT has been paid. If anyone informs the NBR that VAT has not been paid, they will be rewarded."

"This system will gradually be introduced for all packaged products," he said.

The NBR chairman also said a Transfer Pricing Commissionerate will be formed in the next fiscal year.

"Currently, deposits of Tk3 lakh are exempt from excise duty. A proposal to increase this threshold will be reviewed next year," he said.