NBR seeks direct access to taxpayers' bank details

The National Board of Revenue (NBR) wants direct access to taxpayers' bank account details through the Bangladesh Bank as part of an integration endeavour aimed at combating tax evasion. This would give the revenue board easy access to banking details of taxpayers and traders helping them monitor money flow.

The VAT Online Project Office is collaborating with the Bangladesh Bank for this initiative, with the latter making necessary preparations, as confirmed by insiders within the NBR.

Sources on the know have indicated when completed, it would not be necessary to request the information from banks, as the revenue board would be able to directly access the data with permission from the central bank.

In this case, the central bank will give special approval to VAT commissioners and there will be a strict login system. This access will be available through a secured password, OTP.

Kazi Mostafizur Rahman, director of the VAT Online Project, told The Business Standard, "There are some preparatory works before starting this activity, and Bangladesh Bank is developing [that]. Hopefully, we can start it by December."

The NBR is in the process of implementing the Medium and Long-term Revenue Strategy, which also includes the issue of revenue administration's access to bank-held taxpayer information.

The committee established to formulate the revenue strategy presented its draft on 24 August in an event where the NBR chairman was present.

A committee member on condition of anonymity told TBS, "...proposals have been made for us to have access to bank accounts."

Nevertheless, Md Mezbaul Haque, the spokesperson for the Bangladesh Bank, informed TBS that as of now, no such determination has been finalised. He questioned the notion of suddenly providing NBR with access to individuals' accounts, emphasising the need to carefully consider such privileges.

Meanwhile, business people have argued that providing the NBR with direct access to bank information could create fear, including businessmen, possibly leading to reduced banking transactions. Some of them stressed the importance of transparency in this regard.

Dr Muhammad Abdul Mazid, former NBR chairman, also differs from the NBR. He contends that bank accounts are confidential. If the NBR or tax officials were granted access to all accounts, it would infringe upon the principle of confidentiality, he observed.

Economist Dr Ahsan H Mansur echoes this perspective.

Tanjib-ul Alam, a renowned lawyer specialising in company laws, emphasised to TBS that the concept of banking secrecy in relation to the revenue authority has lost its relevance in the country. 

"At present, the NBR is endowed with such powers to gather taxes as per the Customs and VAT Act. The revenue board holds the utmost authority according to existing legislation. So, the confidentiality once associated with banks is no longer there," he concluded.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank Limited, welcomes the initiative but insists on its execution with transparency.

A VAT Commissionerate commissioner, underscored the necessity for the NBR to directly access bank account information, saying that last year, his office requested bank account details of around 100 individuals, yet the concerned banks only furnished information for approximately 30 people. The banks claimed to lack information about the remaining accounts.

The commissioner explained, "Presently, an individual might hold or transact through four accounts in four different banks, but information might only have been provided to the VAT department for a couple of them. Consequently, accurate transactional details are elusive.

"Similarly, a company might secure a significant loan from a bank. However, the current system doesn't enable us to determine if that money has been invested."

Pointing out that accurate VAT collection information is not available at the business level, the VAT commissioner said, "Hundreds of crores of taka are being transacted in various markets in Old Dhaka and 5% VAT is supposed to be levied as Trade VAT on these transactions. But, accurate information about this is unavailable."

Responding to a query as to how the integration with banks will work, the official said that it is neither possible nor necessary to know the information of crores of bank accounts. "Accounts will be identified based on risk management so that information can be collected at any time when needed," he added.

According to data from the Bangladesh Bank, the number of bank accounts in the country was 13.62 crore by last December, with total deposits approximating Tk16 lakh crore. Among these, about 1.10 lakh accounts witnessed transactions exceeding Tk1 crore.

As per NBR's VAT Online Project Office, there are 4.57 lakh Business Identification Number (BIN) holders of whom over three lakh filed tax returns in the previous month. In other words, one-third of BIN holders do not file returns.

Tax collection ratio is not growing with the country's GDP 

The NBR's data reveal a stagnation in the tax-to-GDP ratio over recent years. In fact, the ratio declined to 8.7% in fiscal 2021-22, the lowest in South Asia.

Nonetheless, the government aims to elevate this ratio to 12.3% by 2025 as per the 8th Five-Year Plan. 

The NBR is actively devising the Medium and Long-term Revenue Strategy to fulfil these goals.

Although its finalisation, initially set for March of this year, was delayed, insiders predict completion by December. The draft revenue strategy is expected to be finalised within this year based on feedback from stakeholders and think tanks.

What is there in the draft revenue strategy?

According to the draft Medium and Long-term Revenue Strategy report, apart from the integration with banks, the integration of VAT with the ASYCUDA WORLD System of Customs, and other systems has also been discussed.

On the other hand, as part of the NBR's restructuring, it has been proposed to merge the NBR and Internal Resource Division (IRD) as "Revenue Division" and a full-time state minister for the Revenue Division. The establishment of a research and policy analysis centre in the revenue division has also been proposed.

The draft strategy also proposed to establish a specialised unit to curb money laundering.

An official of the NBR told TBS that currently, the Customs Intelligence and Investigation Department (CIID), and the Central Intelligence Cell of the NBR work to prevent money laundering. According to the proposal, skilled and experienced personnel should be posted in these specialised units and they should be allowed to work there for a long time.

Besides, as part of VAT simplification, integration and modernisation, comprehensive automation, increased voluntary compliance, collection of VAT on digital economy, transfer pricing and risk-based auditing, and big data analytics have been mentioned.