The National Board of Revenue (NBR) has indefinitely suspended the manual selection of VAT returns for auditing, in an effort to curb corruption and promote transparency.

“The scrutiny will remain halted until an automated, risk-based audit system is developed,” NBR Chairman Md Abdur Rahman Khan said on Tuesday at a dialogue on corporate tax and VAT reforms organised by the Centre for Policy Dialogue (CPD) in Dhaka.

Calling the existing VAT law “paralysed,” Khan said it could not be made fully effective between 2012 and 2019 due to business resistance. He revealed that tax evasion in 2023 stood at Tk 2.26 trillion, while NBR’s total collection in FY25 reached Tk 3.71 trillion.

On the audit process, Khan explained that one-third of taxpayers who have never been audited would be selected randomly each year. He also advocated for a single VAT rate with a rebate mechanism to ease the burden on businesses.

The NBR chief acknowledged the structural limitations within the tax authority and stressed the need to separate policy and implementation functions into distinct bodies. He also emphasized the need to automate VAT refunds to minimize delays and reduce harassment.

CPD’s survey findings highlighted loopholes in the manual tax system and instances of taxpayer harassment.

Industry representatives urged reforms, with LafargeHolcim Bangladesh CEO Mohammad Iqbal Chowdhury noting that bribery persisted partly due to the complicity of taxpayers.

Bangladesh’s tax-to-GDP ratio has fallen to 6.6% in FY25, according to IMF estimates, raising concerns about revenue mobilisation and debt risks.