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DHAKA, Dec 10, 2025 (BSS) - Senior government officials, business leaders and policy experts today called for deeper reforms, stronger digitalisation and wider taxpayer coverage to strengthen the country's revenue system, particularly Value-Added Tax (VAT), as Bangladesh moves into its next phase of economic transition.

They made the observations at a discussion on recent progress and persisting challenges in VAT administration and the broader taxation framework, marking the VAT Day and VAT Week 2025 at the revenue board building in the capital.

Finance Secretary Dr Md Khairuzzaman Mozumder said VAT continues to hold enormous potential as a major revenue source, noting that several uniform measures introduced over the past year are already delivering visible results. Some initiatives initially created difficulties for businesses, he said, but long-term benefits are becoming clear.

He said the scope of VAT has expanded through rationalisation of tax expenditures, as reflected in this year's budget, adding that revenue growth reached 15 percent up to November, surpassing expectations. 

Rising revenue at a time of restrained government spending indicates that the private sector's contribution to economic activity is increasing, he added.

NBR Chairman Md Abdur Rahman Khan said VAT is often misunderstood, as businesses do not pay VAT but collect it on behalf of the government. 

Import duties also ultimately fall on consumers, he said, adding that no advanced economy depends heavily on trade taxes. Bangladesh must therefore move towards domestic sources of revenue, particularly income tax and VAT.

He said significant leakage persists in income tax and that, once properly implemented, the effective VAT rate for many businesses could fall below 1 percent because the tax applies only to value addition. Inefficiencies, however, often lead to much higher effective rates. 

He underscored the need for digital integration between VAT and income tax systems to prevent leakage.

Rahman said Bangladesh has been slow in achieving paperless customs despite starting automation efforts in the early 1990s, noting that full automation remains incomplete after more than three decades. Without major reforms, he warned, the country may struggle to generate the revenue needed to meet rising expenditures.

He said the recent reduction of the VAT-able turnover threshold from Tk 3 crore to Tk 50 lakh is expected to expand the number of registered VAT payers. If small businesses remain outside the system, he said, the pressure on large taxpayers will remain unsustainable.

Rahman stressed the importance of moving towards a fully digital tax ecosystem where taxpayer information automatically flows into the system, enabling pre-filled returns similar to those in advanced economies.

Economic Relations Division Secretary Md Shahriar Kader Siddiky praised the NBR's central role in strengthening the revenue system, especially in VAT collection. 

He said expanding both VAT and income tax coverage is vital for domestic resource mobilisation and that there is no alternative to digitalisation. A strong digital system will reduce taxpayer-official interactions, curb harassment and promote good governance, he added.

Financial Institutions Division Secretary Nazma Mobarek said VAT contributes directly to the national budget and supports public welfare programmes including education, health and social protection. 

Despite rising GDP and per-capita income, she said, tax buoyancy remains weak and Bangladesh continues to lag behind peer economies.

She noted that several long-overdue reforms have been implemented under the guidance of the Finance Adviser and the NBR Chairman, adding that exemptions have fallen by about 17 percent compared to last year while essential sectors have received rationalised facilities. Enhanced transparency and accountability will help encourage voluntary compliance, she added.

Policy Research Institute (PRI) Chairman Dr Zaidi Sattar said it is incorrect to assume a direct correlation between per-capita income and the tax-to-GDP ratio. Bangladesh's per-capita income has grown tenfold since the 1970s, yet revenue ratios have remained nearly stagnant-indicating structural weaknesses.

Digitisation and movement toward a cashless economy are crucial for transparency and efficiency, he said. The separation of tax policy formulation from administration-through establishment of the Revenue Policy Division-was a long-awaited step. 

He added that high reliance on trade taxes, which still contribute 28 percent of NBR revenue, is unusual and must be reduced through broader reforms.

FICCI Vice President Yasir Azman said the chamber's 198 member companies contribute nearly one-third of Bangladesh's internal revenue. 

He praised NBR's progress in digitalisation-from the dynamic web portal and Online VAT Project to e-payment facilities and 100 percent online income tax return submission. "These steps form the foundation for the country's future tax ecosystem," he noted.

ICC Bangladesh President Mahbubur Rahman said honesty and sincerity are essential-both from businesses paying VAT and officials collecting it. Strong VAT systems have enabled rapid development in many countries, he noted. 

Consumers must also be willing to pay VAT, while proper documentation must be ensured to prevent leakage. If these principles are upheld, VAT will become a major driver of national development, he said.