Bangladesh may soon abandon its newly introduced quarterly Value Added Tax (VAT) return system and return to the previous monthly filing method after a sharp decline in revenue collection during the first two months of the 2026–27 fiscal year.

According to sources at the National Board of Revenue (NBR), VAT collection — the government’s largest source of tax revenue — fell significantly after businesses were allowed to submit VAT returns and make payments every three months instead of every month.

NBR officials believe the quarterly system is one of the key reasons behind the slowdown in revenue collection. As a result, discussions are underway to restore the monthly VAT filing and payment mechanism.

VAT Collection Falls by More Than 21%

VAT contributes nearly 38 percent of Bangladesh’s total tax revenue. However, official data shows that VAT collection during July and August declined by nearly 22 percent compared with the same period last year.

July 2026 VAT collection: Tk 9,302 crore

July 2025 VAT collection: Tk 11,547 crore

August 2026 VAT collection: Tk 8,362 crore

August 2025 VAT collection: Tk 11,081 crore

In total, VAT revenue during the first two months of the fiscal year stood at Tk 17,663 crore, down from Tk 22,628 crore during the corresponding period last year — a decrease of Tk 4,965 crore.

NBR Concerned Over Monitoring Challenges

Officials say the quarterly filing system has made tax monitoring and compliance enforcement more difficult.

Under the previous system, VAT was deposited into the government treasury before invoices were issued. Later reforms allowed businesses to hold collected VAT for up to 30 days before depositing it. The current quarterly arrangement provides even more flexibility, enabling companies to retain VAT funds for up to three months.

Tax officials argue that large corporations are benefiting by investing collected VAT funds in fixed deposits or using them for other business activities before remitting them to the government.

They also warn that while larger companies enjoy greater cash-flow advantages, smaller businesses may struggle to accumulate and pay three months’ worth of VAT at once.

Government Considering Policy Reversal

An NBR official, speaking on condition of anonymity, said preparations for reverting to the monthly system have largely been completed. The proposal is reportedly awaiting approval from Prime Minister Tarique Rahman before a final decision is announced.

However, another senior NBR official cautioned against drawing conclusions too early, noting that businesses still have until the end of September to submit quarterly returns. A clearer picture is expected to emerge after the first week of October.

Business Community Warns Against Frequent Policy Changes

Business leaders have expressed concern over the possibility of another policy reversal only months after the quarterly system was introduced.

FBCCI Administrator and business leader Md. Fazlul Hoque said frequent policy changes create uncertainty for investors and businesses.

“Changing a major tax policy within just three months is not a positive signal for the business environment,” he said, while acknowledging that the government may revise the system if revenue needs become urgent.

Meanwhile, Bangladesh Shop Owners Association President Md. Helal Uddin argued that improving transparency in tax administration would be more effective than repeatedly changing VAT regulations.

The debate now centers on whether the government should prioritize business flexibility or immediate revenue recovery as it seeks to meet its fiscal targets.