NBR wants Tk52,000cr extra source tax, businesses worried

Infograph: TBS

Despite offering tax relief in several areas in the FY2026-27 budget, the government has set the National Board of Revenue (NBR) an ambitious target of collecting 56% more income tax than the previous fiscal year. To achieve this goal, the tax authorities plan to rely heavily on source tax, aiming to collect an additional Tk52,000 crore through this channel.

On Monday, the NBR submitted an income tax collection plan to Prime Minister's Economic Affairs Adviser Rashed Al Mahmud Titumir, outlining its strategy to boost revenue, with source tax collection playing a central role.

Business leaders, however, fear that the drive to collect an additional Tk54,000 crore could lead to increased harassment of businesses. They warn that, alongside targeting major tax evaders, even minor compliance errors by companies could trigger enforcement actions, potentially increasing irregularities in the tax administration process.

Earlier this month, the NBR announced that it would conduct special inspections to verify whether organisations responsible for deducting source tax are complying with the law. Under the initiative, tax officials will have the authority to enter business premises without obstruction, inspect records, and seize documents and computers where necessary.

The rules also provide for fines of up to Tk50 lakh for non-cooperation.

The business community has taken the issue seriously, with several trade bodies already issuing statements expressing concern over the move.

NBR officials, however, reject those concerns, arguing that only companies attempting to evade taxes have reason to worry.

Speaking to The Business Standard on condition of anonymity, a senior NBR official said, "More than 70% of our income tax collection comes from source tax, which is mainly deducted by companies. However, this is also where a significant portion of tax evasion occurs."

He explained, "A company may be required to deduct Tk1 crore in source tax annually, but through various methods it may end up paying only Tk50 lakh or even Tk30 lakh. Until now, monitoring has not been strict. This time, legal provisions will allow us to strengthen oversight.

"So long as a company does not evade taxes, it has nothing to fear from this initiative."

In the recently concluded FY26, the NBR collected Tk1,42,827 crore in income tax, of which Tk1,02,112 crore came from source tax. In FY27, it aims to collect Tk1,54,000 crore through source tax alone, an increase of nearly 51% from the previous fiscal year.

The official noted that although the latest budget granted source tax exemptions in several sectors, the NBR must still increase overall income tax collection by 56%.

"That means we have to achieve the target by reducing the compliance gap," he said.

He added that a new 0.20% source tax on retail businesses is expected to generate an additional Tk2,000 crore. The NBR will also strengthen efforts to ensure proper tax collection from imports, supplies, banking transactions and remittance taxes.

Business leaders remain concerned.

Taskeen Ahmed, president of the Dhaka Chamber of Commerce and Industry (DCCI), told TBS, "We have no objection to uncovering tax evasion. But we fear that businesses may face harassment over minor mistakes.

"The policies formulated at the NBR's central level are often not implemented properly by field officials."

"Businesses are already under pressure, and this could create additional burdens," he added.

Eight business associations, including the BGMEA and the BKMEA, have issued a joint statement, expressing concern over the NBR's decision to grant tax officials broad powers to enter business premises, seize documents and impose penalties.

Mohammad Hatem, president of the BKMEA, told TBS, "Companies collect source tax on behalf of the NBR – a responsibility that essentially belongs to the tax authorities. If a company makes an error in that process, it is not reasonable to impose fines or additional tax liabilities on it."

He said, "If field-level officials are given unrestricted powers to enter business premises and enforce tax collection, it will increase harassment and create greater opportunities for bribery. This initiative risks making the taxation system more controversial."

Dr Syed Md Aminul Karim, a former member of the National Board of Revenue (NBR), believes there is no reason to create fear over the issue.

He said the NBR already has the legal authority to enter business premises, seize documents and impose fines if officials are obstructed. "So, there is no need to make a separate announcement about these powers," he said.

"If the NBR suspects that a company is evading taxes, it can already exercise those powers. But there is no justification for creating fear among the business community," he added.

However, he acknowledged that tax evasion involving source tax is widespread. "The NBR needs to develop effective mechanisms to curb such evasion," he said.