NBR Weighs Reversal of Quarterly VAT System After Two Months of Falling Revenue

Bangladesh's National Board of Revenue is reconsidering one of its own signature reforms less than three months after rolling it out, weighing whether to abandon a new quarterly VAT payment system and return businesses to filing and paying every month. The system, introduced from July 2026 as part of the national budget for the current fiscal year, let registered businesses hold on to the value added tax they collect from customers for up to three months before remitting it to the government treasury, a change that was meant to cut the paperwork burden on firms that had complained for years about monthly compliance costs.

Two months of actual data appear to have unsettled that plan. According to figures reported by NBR, VAT collections came in at Tk9,301 crore in July 2026, down from Tk11,547 crore in the same month a year earlier, and at Tk8,362 crore in August 2026, down from Tk11,081 crore in August 2025. Combined, that is a roughly 20 percent year on year decline over the two months, at a time when the government is under pressure to widen its revenue base rather than watch it shrink.

Why NBR Is Getting Cold Feet

An NBR official, speaking on the reasoning behind the reconsideration, put the concern in blunt terms: the board is facing problems both in monitoring and in terms of risk. Under the old monthly system, VAT circle offices could track collection by unit, division and business on a rolling basis, spotting shortfalls or irregularities within weeks. The quarterly system strips away that visibility for three months at a stretch, and NBR says it currently lacks the systems infrastructure to deposit VAT against individual invoices in something close to real time, the kind of technical backbone that would make a longer payment window safe to operate.

There is also a more basic worry about incentives. Businesses that collect VAT from their customers are, in effect, holding public money on the government's behalf until they remit it. Extending that window from one month to three means firms can sit on larger sums for longer, and officials have raised concerns that some businesses are earning interest or otherwise benefiting from funds that ultimately belong to the state. Compliance itself appears to have slipped too: VAT return submissions fell to 3.06 lakh in July from 3.28 lakh in June, a decline NBR points to as early evidence that a lighter filing schedule is not translating into higher compliance, contrary to what the reform's designers had hoped.

Businesses Push Back

Not everyone agrees the fix is to go back to monthly filing. Debabrata Roy Chowdhury, a former director at Nestle Bangladesh who has been vocal on tax policy, warned that reverting to the monthly system now would conflict directly with the government's own stated goal of reducing the compliance burden on businesses, a goal that was a central selling point when the quarterly system was first announced in the FY27 budget. Smaller traders make a more practical version of the same argument. Amir Hossain Nurani, a steel trader, said monthly VAT returns are especially burdensome for small and mid sized businesses, which often have to hire dedicated staff just to handle the paperwork, a fixed cost that eats disproportionately into thinner margins.

Adding to the confusion, some businesses say field level tax officials never fully stopped pushing for monthly payments in practice, even after the quarterly facility was formally announced, with several reporting pressure from local offices to keep paying monthly despite being legally entitled to wait. That gap between the policy on paper and the policy as enforced on the ground has made it harder for NBR to draw a clean line under the reform's first quarter, since some of the shortfall in July and August could reflect confused implementation as much as businesses genuinely exercising their new right to delay payment.

The Numbers at a Glance

Period	VAT collected	Same month, 2025	Change
July 2026	Tk9,301 crore	Tk11,547 crore	down about 19%
August 2026	Tk8,362 crore	Tk11,081 crore	down about 25%
Two months combined	Tk17,663 crore	Tk22,628 crore	down about 22%

What Happens Next

For now, the quarterly system remains in force on paper. NBR has told businesses they must submit their first quarterly returns by the end of September, covering the July to September period, regardless of how the policy debate is resolved. Bangladesh's finance minister has indicated a decision on whether to keep, adjust or scrap the quarterly system will follow once officials have reviewed that first full quarter of data, and any change of this scale is expected to need sign off from the top of government before NBR can act.

The episode adds to a run of tax policy the current administration has had to defend on multiple fronts at once this year, from a steep cut to solar equipment import duties meant to ease an energy crisis, to new anti money laundering obligations for the securities sector, to a first ever sovereign bond issuance being prepared for international markets. A rapid reversal of a flagship VAT reform, just months after it was unveiled as a business friendly simplification, would be an unusually visible admission that a signature policy did not survive contact with the numbers, and NBR now has to weigh that reputational cost against the roughly Tk5,000 crore in monthly VAT revenue the two month shortfall suggests is currently at stake if the current system is left unchanged for the rest of the fiscal year.