Bangladesh fiscalization: Has it finally accelerated fiscalization?
On December 6, 2023, the NBR (National Board Revenue) announced that the installation of EFD (Electronic Fiscal Device) is finally profitable. It is said that 18,000 EFDs have been installed so far and that 60,000 EFDs are expected to be installed in the current financial year.
“The businesses which used to pay Tk5,000-6,000 per month in Value Added Tax (VAT), now pay Tk50,000 monthly after installing EFD”, said NBR member Dr Moinul Khan. That’s almost 10 times more.
However, a long history of continuous failures, delays, weak response from the suppliers, and a way too long accreditation process prevented this country from achieving fiscalization earlier.
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The fiscalization process in Bangladesh goes back a long way. In July 2009, the NBR made it mandatory for 11 types of businesses to install and use ECR machines and POS software to increase VAT collection. But many taxpayers refused to buy the necessary equipment and those who bought it stopped using it after a while. Fiscalization was, therefore, unsuccessful, which is why the obligation was initiated again in 2016. Only 2,970 shops out of 11,005 were identified, that is 35 % of the selected shops installed either the ECR machine or the POS terminal. The reason for such a low response was the high price, the long accreditation process, and the weak response of the device suppliers.
To overcome these problems, NBR decided to assign the entire procurement work to one supplier. In February 2017, NBR announced a tender for Electronic Fiscal Device Management System (EFDMS), a server to capture the transaction data of the retail/wholesale outlets of the country and 11,000 EFDs (that is 10,000 Fiscal Cash Registers and 1,000 Fiscal Printers) to initiate the process. The tender was not realized, but it was modified and repeated with a more modern technological solution at the end of 2019. The plan was to purchase EFDMS and 10,000 EFDs out of the 600,000 required from one supplier. The tender was awarded to a Chinese company, starting with 100 pilot EFDs, but for the same reasons as in the previous period, fiscalization turned out to progress at a very slow pace.
Finally, a domestic company, named Genex Infosys, has been tasked as the vendor to set up and operate EFDs, and SDCs through outsourcing, which will collect VAT on behalf of the government. The company will install these machines at its own cost, for which it will get a commission of 0.53%. That is, if the government gets a VAT of Tk100, the company will get a commission of Tk0.53.
If we go back to the history of the fiscalization process in Bangladesh and to the fiscalization results in the last 5 months, we can ask ourselves the following question: How much money has the NBR lost in the period since 2009 if the results and tax collection are as spectacular as they are now?
The indecision of Bangladesh’s governments, the wrong choice of partners in the project of fiscalization, indulgence towards taxpayers, or something else contributed to having a lot of the expected tax go to waste. How much tax could have been collected in the past 12 years? These are probably large numbers.
What can we learn from Bangladesh’s experience? That the first prerequisite for a successful fiscalization is the Government’s determined attitude to enter the process quickly and without giving up.
