Next budget to tighten VAT compliance of businesses

The government is preparing a set of sweeping measures in the upcoming national budget to expand the VAT net and improve compliance across the business sector.
Policymakers aim to bring more enterprises, particularly those in the informal economy, under the tax system without raising rates.
The proposed reforms, centred on mandatory VAT registration and digital filing, are expected to significantly increase revenue collection while enhancing transparency and accountability in tax administration.
In the budget, scheduled to be placed on June 11, 2026, Finance Minister Amir Khasru may also propose making a Business Identification Number (BIN), commonly known as a VAT registration number, mandatory for trade licence renewal.
Additionally, the government is expected to make online submission of VAT returns compulsory for all businesses starting next year.
According to official sources, these proposals were recently presented by the National Board of Revenue (NBR) to the finance minister, with a target of generating an additional Tk 200 billion in VAT revenue in the next fiscal year through expanded coverage.
Speaking to The Financial Express, the finance minister said the government has limited scope to increase tax rates in the upcoming budget, as the private sector is already struggling with the impacts of the Middle East conflict.
"We will have to focus on expanding the tax net and curbing tax evasion next year," he added.
A senior NBR official said the minister has instructed tax officials to prioritise expanding the tax base and bringing the informal economy into compliance.
He acknowledged that while a large number of businesses remain outside the tax net, compliant businesses continue to face various challenges.
Tax collection from the retail sector, in particular, remains largely beyond the NBR's effective purview.
Professor Mustafizur Rahman, Distinguished Fellow at the Centre for Policy Dialogue (CPD), said the NBR often relies on easier methods of tax collection instead of incorporating the vast retail sector into an automated system.
"We have not seen any progress in the NBR's initiative to install electronic fiscal devices for VAT collection in retail shops," he said.
The NBR had earlier planned to install such devices in around 300,000 shops to digitise VAT collection, but progress on the initiative appears to have stalled.
Despite this, Professor Rahman welcomed the effort to expand the VAT net in the coming fiscal year to improve compliance.
He emphasised the need to address sectors where VAT is collected from consumers but not deposited into the public treasury.
He also called for bold reforms to enhance fiscal capacity, noting that Bangladesh's revenue-to-GDP ratio stands at only 7.9 per cent, compared with the South Asian average of 15 per cent.
VAT consultant Md Daud Faraizy pointed out that current VAT laws still allow manual submission of returns in some cases.
"Although the government is encouraging online submissions to enhance transparency, legal amendments are needed to make it mandatory," he said.
Chartered Accountant Snehasish Barua echoed this view, stating that mandatory online filing would reduce unnecessary complications and limit opportunities for informal financial dealings between businesses and tax officials.
At present, around 700,000 businesses in Bangladesh hold electronic Business Identification Numbers (BINs).
Currently, trade licence holders are not required to obtain a BIN for licence renewal, nor is a BIN necessary for opening a business bank account.
Snehasis Barua, also a tax expert, said: "To truly modernise our tax system, online VAT return filing must be made mandatory. This step would eliminate manual processing errors, facilitate automated bank refunds and close loopholes that allow some officials to arbitrarily demand manual returns."
"Coupling this with e-invoicing would enable automated invoice cross-matching, significantly improving corporate transparency. By fully digitising these processes, the government would gain real-time data to support better policy decisions, streamline revenue mobilisation and help raise the national tax-to-GDP ratio."
Officials believe that the proposed measures, mandatory BIN for bank accounts, trade licence renewal and online VAT return submission, will significantly reshape VAT expansion in the coming fiscal year.

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