Tk23,800cr VAT held up with govt entities

The National Board of Revenue (NBR) faces a daunting challenge in collecting a massive amount of revenue held up with various institutions, primarily government entities.

The situation is worsening gradually, with an increasing sum of money becoming entangled in a growing backlog of new cases.

According to the NBR, around Tk25,000 crore of value-added tax (VAT) alone remains unrecovered, with nearly Tk24,000 crore owed by government entities.

Additionally, there are around 10,000 pending cases involving Tk21,600 crore. The actual amount of NBR claims will be ascertained once the cases are disposed of.

Moreover, the Income Tax and Customs Department also grapples with a substantial amount of revenue stuck in arrears and lawsuits. NBR officials said a significant portion of these disputed revenues are held by government institutions.

Experts and economists consider the tendency for non-payment of dues by government entities to be a significant obstacle to bringing order to the revenue sector.

Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD), told The Business Standard, "Due to these reasons, on the one hand, the NBR cannot achieve its revenue collection targets, and on the other hand, regular taxpayers are discouraged."

He highlighted that the culture of non-payment of taxes contradicts the interests of revenue discipline, emphasising that a vicious cycle is created when one organisation does not pay its dues to another on time.

The issue was also addressed in a press conference at Agargaon in the capital on Wednesday.

Responding to questions from reporters, NBR Member Shahidul Islam said, "We are working to collect the outstanding revenue and to reduce the number of cases in the High Court. Meanwhile, many verdicts have been in favour of the government."

According to the NBR, the outstanding VAT with Petrobangla, the oil, gas, and mineral corporation of Bangladesh, is over Tk22,000 crore.

For the last eight years or more, there have been many discussions and meetings with the entity on ways to collect revenue, including due VAT, but no effective results have been achieved.

A senior NBR official told TBS, "The revenue board has held a meeting on the issue recently. But Petrobangla has said they will pay the money if they get the allocation from the finance ministry."

According to sources, during a visit to Dhaka last October, an IMF team inquired about ways to collect a significant amount of revenue stuck with Petrobangla in a meeting with the NBR.

In addition to Petrobangla, there are 28 government entities that owe the NBR.

These entities include the Civil Aviation Authority, Chattogram Port Authority, Standard Asiatic Oil Company, Meghna Petroleum, Uttara Regional Passport Office, Mymensingh Regional Passport Office, Jashore Passport Office, Bangladesh Services Limited, Pragoti Industries Limited, and several municipalities across the country.

Former NBR member Md Farid Uddin told TBS, "When government institutions are in compliance, others are also encouraged. But over the years, it has been seen that one organisation is reluctant to pay the dues of another."

Citing the example of Petrobangla, he said, "Now the situation has reached such a stage that it will not be possible for Petrobangla to pay this amount unless it receives an allocation from the finance ministry."

About Tk22,000cr of VAT is stuck in cases

Compounding the NBR's woes, another Tk21,600 crore is tied up in nearly 10,000 pending cases. This backlog grows steadily as new cases outnumber resolved cases, further hindering revenue collection efforts.

However, not all the disputed revenue will ultimately be recovered. Historical data reveals instances where NBR lost high-stakes cases, resulting in zero revenue gains. Experts attribute this to poorly justified claims that crumble under legal scrutiny.

Moreover, some individuals and businesses exploit the legal system by prolonging litigation, using it as a tool to delay or even evade legitimate tax obligations. This further strains NBR's resources and hinders efficient revenue collection.

Farid Uddin believes that the respective NBR departments also have the responsibility to ensure that such cases do not occur.

He stated, "Every year there are some changes in the budget. The officers of NBR should inform the departments that will be affected by the tax changes as soon as the budget is over. But it is lacking."

"Because of this, the number of cases and the amount of outstanding revenue are increasing," he added.

VAT collection from businesses surges as EFD rollouts: NBR

The installation of Electronic Fiscal Devices (EFD) machines in business establishments is reaping its benefits, said the NBR at the press conference.

NBR member Moinul Khan said, "The businesses that used to pay Tk5,000-6,000 per month in VAT now pay Tk50,000 monthly after installing EFD."

He said, "18,000 EFD machines have been installed so far; a total of 60,00 will be installed in the current financial year."

EFD machines are connected to NBR's server, which is called the EFD management system. As a result, any sales information inputted into the EFD machine is sent to NBR. So, there is no way to evade the VAT collected from the buyer.

However, if no sales information is input there, NBR does not have the opportunity to know this information, which is considered to be a big challenge for NBR. To meet this challenge, NBR has appointed a company that will oversee the process.

NBR Chairman Abu Hena Md Rahmatul Muneem highlighted various activities at the press conference on the occasion of National VAT Day.

"Recently, imports have decreased by about 30%. Yet, there was a 17% growth in VAT collection in the last five months," said Moinul Khan.

Asked whether the ongoing political unrest will affect revenue collection, NBR Member Masud Sadiq said that everyone knows that revenue collection is better if the political environment is stable.

"However, it [political unrest] also has some positive impacts. For example, sales of cigarettes and soft drinks have increased," he added.