NBR targets over 10,000 firms to plug Tk38,000cr VAT leakages

Infograph: TBS

More than 10,000 businesses deemed to pose a high risk of tax evasion are set to come under the National Board of Revenue's (NBR) scanner as part of a drive to collect an additional Tk38,000 crore in value-added tax (VAT) through enhanced enforcement.

According to NBR officials, the list will primarily include businesses with monthly transactions exceeding Tk10 lakh that are considered vulnerable to revenue leakage. 

It will also cover relatively smaller firms suspected of underreporting VAT liabilities, although the main focus will be on medium-sized businesses and large VAT payers.

The targeted entities are expected to include importers, real estate companies accused of concealing purchase information, manufacturers, businesses engaged in domestic sales and supplies, e-commerce platforms, and other VAT-registered firms.

The NBR's VAT wing plans to identify around 8,000 high-risk businesses and recover an additional Tk25,000 crore by detecting VAT evasion during the current fiscal year.

Separately, the NBR is preparing a special drive targeting 2,000 large VAT-paying businesses that each pay more than Tk1 crore in VAT annually. It aims to collect an additional Tk10,000 crore from these taxpayers, over and above their regular VAT payments.

In total, the NBR expects to generate Tk35,000 crore in additional VAT by uncovering evasion among these 10,000 businesses. It also plans further compliance measures expected to raise another Tk3,000 crore, taking the overall additional VAT collection target to Tk38,000 crore.

The NBR presented the enforcement strategy to the Prime Minister's Economic Adviser Rashed Al Mahmud Titumir at a meeting held at the revenue board yesterday.

Nearly Tk1 lakh crore targeted through enforcement

Under the plan, the NBR aims to raise Tk99,000 crore – including the Tk38,000 crore from 10,000 firms  – in additional VAT revenue from various sources in FY27. 

The target also includes Tk12,000 crore from the tobacco sector, Tk14,000 crore through recovery of outstanding dues, Tk15,000 crore from higher implementation of the ADP, and Tk20,000 crore from an assumed 10% natural growth in VAT receipts. 

The NBR has also stepped up efforts to detect income tax evasion. As part of the initiative, the revenue authority has announced plans to seize documents and computers from organisations responsible for deducting tax at source if they are found to have evaded their withholding tax obligations. The NBR recently disclosed the measures in a press release.

The move has already sparked concern among businesses. Several trade bodies have opposed the initiative, arguing that the proposed enforcement measures could create uncertainty and disrupt business operations.

Massive non-compliance in VAT 

NBR officials said a significant compliance gap exists among VAT-registered businesses, creating substantial scope for additional revenue collection.

An NBR senior official who attended the meeting, said they have analysed the data and found that a large proportion of VAT-registered businesses have significant compliance gaps. 

"If those gaps can be narrowed, it will be possible to collect a substantial amount of additional VAT," the official told The Business Standard, requesting anonymity.

He cited the real estate sector as an example, saying that better detection of discrepancies in property transactions could generate significant additional VAT revenue.

Referring to a leading real estate developer, he said the NBR had already uncovered around Tk450 crore in VAT evasion by the company.

"We have already launched specialised enforcement activities. Some officials have been assigned exclusively to detect VAT evasion in the real estate sector," he added.

Revenue target for FY27

The government has set an overall revenue collection target of nearly Tk6.04 lakh crore through the NBR for FY27, around 47% higher than the actual collection in FY26. It is the highest year-on-year revenue growth target since Bangladesh's independence.

Of the total, the VAT and supplementary duty wing has been assigned the largest target of Tk3.21 lakh crore, roughly 45% higher than the previous fiscal year's collection.

The government has prioritised revenue mobilisation from the beginning of the fiscal year to meet the ambitious target, although economic activity has yet to recover strongly enough to support such rapid growth.

Additional revenue possible

Tax experts, however, believe the additional revenue target from tackling evasion is achievable even without a significant acceleration in economic activity.

Former NBR chairman Muhammad Abdul Mazid told TBS, "Given the size of our economy, VAT collection could be at least double the current level if all eligible VAT were collected."

He said many businesses that should be paying VAT remain outside the tax net, while others pay only a fraction of what they owe. Some businesses also collect VAT from consumers but fail to deposit it with the government.

"If these leakages are addressed properly, collecting an additional Tk38,000 crore in VAT is achievable," he said.

Mazid added that automation and greater integration between the NBR and other government agencies would be the most effective way to curb evasion, reducing the need for intrusive field inspections or creating unnecessary fear among businesses.

According to NBR data, around 800,000 businesses are currently registered for VAT, of which roughly 500,000 submit monthly returns. A large number of those, however, file zero returns, reporting no VAT liability.

Officials also acknowledge longstanding allegations that many businesses evade VAT by colluding with field-level revenue officials.