NBR misses Q1 revenue target by Tk41,879cr

The National Board of Revenue (NBR) missed its first-quarter collection target for fiscal year 2026-27 by nearly Tk41,879 crore, driven by a sharp drop in value-added tax receipts and sluggish economic activity. 

The tax authority collected Tk92,517 crore during the July-September period against a target of Tk1.34 lakh crore, leaving a 31.2% deficit according to NBR sources. 

Although total revenue grew marginally compared to the Tk90,825-91,390 crore gathered during the same period last year, overall collection growth has slowed considerably.

All three major revenue streams fell short of their quarterly targets, with value-added tax accounting for nearly half of the total deficit. 

VAT collection reached Tk29,348 crore against a target of Tk49,405 crore, creating a gap of Tk20,057 crore and marking a 16% decline from the roughly Tk35,000 crore collected during the same period last year. 

Revenue from import and export duties stood at Tk30,129 crore against a Tk42,265 crore target, leaving a shortfall of Tk12,136 crore, while income and travel tax receipts reached Tk33,040 crore against a target of Tk42,726 crore, falling short by Tk 9,686 crore. 

The sharp deterioration in VAT collection reflects ongoing pressure on consumer spending and broader economic activity entering the second quarter.

VAT collection under pressure

NBR data show that Bangladesh has around 830,000 VAT-registered establishments, but only 2.62 lakh, or 31.54%, submitted returns online.

Of those filing returns, approximately 173,000, or 66.21%, submitted zero returns, reporting no VAT payable.
The figures also reveal a heavy concentration of VAT revenue among a small number of businesses, with just 337 establishments accounting for 80.67% of total VAT collection.

The decline in VAT receipts coincided with changes to return-filing requirements introduced in the current fiscal year’s budget.

Under the Finance Act 2026, businesses were allowed to submit VAT returns quarterly instead of monthly, a measure intended to reduce compliance costs following longstanding demands from business associations.

However, NBR sources said many establishments had yet to submit returns for July and August, contributing to weaker collections in September.

The government subsequently reversed the decision, restoring monthly VAT return filing.

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On 28 September, the Cabinet approved the draft Value Added Tax and Supplementary Duty (Amendment) Ordinance, 2026, reinstating the previous system.

Under the revised rules, businesses must submit returns within 15 days of the end of each month.
Government and semi-government organisations, banks, insurance companies and businesses submitting zero returns have 20 days to file.

The changes took effect in October, while the NBR extended the deadline for July and August returns until 25 October to allow businesses to comply without penalties.

Economic slowdown adds to challenges

Towfiqul Islam Khan, additional research director at the Centre for Policy Dialogue (CPD), attributed the revenue shortfall to several factors, including changes in VAT filing rules, slowing economic activity and weaknesses in tax administration.

He said it was too early to determine the full impact of quarterly VAT filing, adding that October’s revenue figures would provide a clearer picture.

Banking sector reforms could also affect tax receipts, he said.

Higher provisioning against non-performing loans could reduce banks’ reported profits, resulting in lower corporate income tax payments. 

Revenue growth slows sharply

The latest performance contrasts with the first quarter of FY2025-26 (FY26), when the NBR recorded strong year-on-year revenue growth.

During July-September last year, total collection stood between Tk90,825 crore and Tk91,390 crore, representing growth of approximately 20.21% over the corresponding period of FY25.

Although the NBR missed its quarterly target of around Tk99,904 crore, the shortfall was considerably smaller than this year’s.

VAT collection was particularly strong during that period, reaching approximately Tk34,819 crore to Tk35,000 crore, up around 29%-30% year-on-year.

By comparison, VAT receipts fell to Tk29,348 crore in the first quarter of FY27, marking a decline of roughly 15%-16%.

Overall revenue collection grew by only about 1.2%-1.9% year-on-year, a sharp slowdown from the previous fiscal year’s first-quarter growth.

The figures underscore the challenges facing the NBR in meeting its revenue targets amid weakening VAT receipts, subdued economic activity and changes in tax administration.