Widen the Tax Net Without Burdening Businesses

Bangladesh needs to collect more revenue. However, the recent fall in VAT collection shows that simply setting higher targets will not solve the problem. According to a report published in this newspaper, VAT collection fell by around 20 per cent in July and August compared with the same period last year. This comes when the National Board of Revenue (NBR) has a Tk 6,04,000 crore revenue target for the current fiscal year. Against this backdrop, the government must find a better balance between widening the tax base and keeping tax compliance manageable for businesses.

The latest figures are concerning. VAT collection fell from Tk 11,547 crore in July last year to Tk 9,301 crore this July. In August, it dropped from Tk 11,081 crore to Tk 8,362 crore. Meanwhile, the NBR is considering a return to monthly VAT payments after introducing quarterly returns in the last budget. The quarterly system sought to reduce paperwork for businesses. Nevertheless, the NBR is now reviewing the decision following the decline in collection. Concurrently, it plans to increase VAT-registered businesses from around 8,00,000 to 2 million within a year. Widening the tax base makes sense, but the process needs consistency. Businesses cannot easily adjust when the rules keep changing.

The burden falls particularly hard on small traders. Many struggle with online VAT returns because they lack digital skills or face unreliable internet and electricity services. Technical problems with the NBR’s system add to the frustration. In these circumstances, another sudden change could make compliance even harder. Moreover, registering more businesses does not automatically mean collecting more revenue. Businesses need to understand the rules and follow them regularly. We should also avoid linking the recent fall entirely to the quarterly return system, since other economic and administrative factors may have played a role.

Therefore, the NBR should first determine what caused the shortfall before changing the system again. It should simplify VAT procedures, improve its online services and help small businesses meet their obligations. A system that allows quarterly returns while collecting VAT monthly could offer a practical compromise. Even so, the government should consult businesses before introducing any major change and give them enough time to prepare.

More importantly, widening the tax net should not mean putting more pressure on businesses that already struggle with rising costs and weak sales. We need more taxpayers, but we also need taxpayers who can comply without unnecessary difficulty. Thus, the NBR should look beyond registration numbers and focus on effective compliance. A clear, stable and predictable tax system will make it easier for businesses to follow the rules and easier for the government to collect revenue. That is the balance tax reform should aim for.