The National Board of Revenue (NBR) has announced plans to launch a data-driven integrated system to detect mismatches between taxpayers’ declared income and their actual income, expenditure and accumulated assets. Under the new system, each taxpayer will have an “integrated” profile that automatically flags discrepancies between income and spending.
Under this system, each taxpayer’s integrated profile will automatically cross-check income declared in tax returns against credit card usage, education and health spending, foreign travel, bank transactions, vehicle purchases, stock market investments, and the purchase, sale or use of other movable and immovable property.
The National Board of Revenue disclosed the initiative as part of efforts to curb tax evasion and boost revenue collection. NBR income tax, VAT and customs officials disclosed the plan at a recent meeting of the parliamentary committee on the Finance Ministry. The information comes from the meeting’s working papers.
The meeting, chaired by Finance Ministry parliamentary committee chairman Mushfiqur Rahman MP, was attended by Finance Minister Amir Khasru Mahmud Chowdhury and committee members Nurul Islam, Mir Shahe Alam, Jalal Uddin, Moinul Islam Khan, Shahadat Hossain, Saiful Alam, Syed Zainul Abedin and Abul Hasnat. Senior officials from the Bangladesh Bank governor’s office, the Financial Institutions Division, the Economic Relations Division (ERD), the National Board of Revenue (NBR) and the parliament secretariat also attended.
Meeting sources said the new technology will automatically assess whether a taxpayer’s income, expenditure and assets are consistent. If a major discrepancy is found, the taxpayer concerned will be placed in a high-risk category.
NBR plans to complete these integrated taxpayer profiles within the next two to three years and to build a robust “income tax data warehouse.” Alongside this, separate profiles will be created for high-net-worth individuals to verify whether their tax payments align with their financial capacity.
Bangladesh’s tax-to-GDP ratio is very low, and the meeting discussed various plans to raise it. The country’s current tax-to-GDP ratio stands at 6.8 percent. The plan is to raise it by another 2 percentage points in the short term, to 10 percent in the medium term, and to 15 percent by 2035.
NBR has also proposed creating “customs attaché” posts at Bangladesh missions in key trading-partner countries to curb commercial fraud, revenue evasion and trade-based money laundering (trade mis-invoicing).
NBR said such risks cannot be detected using domestic data alone. As a result, the proposed customs attachés would help curb revenue evasion by gathering information on the origin of imported goods, exporter details, commercial transactions and related foreign companies.
A system-based risk-management framework has also been proposed to closely review specific financial indicators to curb corporate income tax evasion. These would include a company’s turnover versus declared profit, gross profit ratio, related-party transactions, interest expenses, management fees, royalties, commissions, depreciation, bad debts, related-party loans, director remuneration, sales in the local market against the value of imported goods, and VAT turnover versus income tax turnover. NBR will also launch a property-based income tax compliance program in district and divisional cities, which is expected to boost revenue collection from houses, flats and commercial properties.
NBR said it is planning to establish an income tax debt management system to recover outstanding taxes. It will also gradually adopt faceless assessment and faceless audit processes to reduce unnecessary direct contact between taxpayers and officials. Tax officials would complete assessments and reviews through a digital platform.
Within the next three months, NBR is expected to clean and classify its TIN database, compile a list of top outstanding income tax defaulters, and identify high-risk companies and high-net-worth individuals.
Within three to six months, an awareness campaign will be launched to encourage taxpayers to file returns, the “high net worth individual unit” will be formally activated, and a central risk-based audit system will be piloted. Within 6 to 12 months, taxpayers’ bank accounts, property, vehicle and company information will be centrally linked, and piloting of automated income-asset profiling will begin. Electronic audit selection and an automated withholding ledger system will also be prepared during this period.
Within one to two years, pre-filled income tax returns, a nationwide risk-based audit system, faceless assessment and an automated tax refund system will be introduced. At the same time, the mid-level taxpayer division will be restructured and international tax-determination (transfer pricing) capacity will be strengthened.
Former NBR chairman Dr. Mohammad Abdul Mazid said such timely proposals have been discussed for a long time without effective implementation. However, he said, if the interim government’s revenue reform committee’s recommendations are finally put into practice, they will certainly bring a positive and far-reaching change to the revenue sector.