Bangladesh’s Tax System Struggles Under Repetitive Audits

A credible tax system depends on fairness, predictability and finality. While Bangladesh has taken steps to expand its tax base and update tax laws, corporate taxpayers continue to face serious challenges, particularly due to repetitive and regressive audit practices that deny closure and certainty.

Once a company submits its income tax return, the assessment is handled by the Deputy Commissioner of Taxes (DCT). In principle, this stage should determine tax liability based on audited financial statements, supporting documents and applicable laws. In reality, assessments are often arbitrary. Sales figures verified through statutory audits are frequently rejected without sound justification, while routine business expenses are disallowed on vague grounds, despite compliance with recognised accounting and audit standards.

This approach inevitably leads to a rise in appeals. Confident in the accuracy of their audited accounts, taxpayers are forced to seek relief at higher appellate levels. The process consumes time and resources for both businesses and tax authorities, drawing attention away from genuinely high-risk cases.

Even after assessments are completed, closure remains elusive. Many cases are later selected for audit by teams from other tax circles within the same zone. The criteria for selection are rarely transparent, and auditors often re-examine issues already reviewed, reopening matters taxpayers believed were settled.

The problem deepens with additional audits by other wings under the National Board of Revenue, including inspection and intelligence units. These bodies independently scrutinise returns that have already been assessed and re-audited, each introducing new interpretations, objections and potential tax demands.

Further uncertainty arises from provisions in the Income Tax Act 2023 that allow authorities to select returns suspected of tax evasion. While such powers are necessary in principle, their repeated use after multiple reviews raises a fundamental question about how income continues to escape assessment despite extensive scrutiny.

The cumulative impact is persistent uncertainty. Taxpayers are left without a clear point at which liabilities can be considered final, creating unpredictable contingent liabilities that complicate financial reporting, investor disclosures and long-term planning.

At the heart of the issue lies a structural weakness within tax administration: limited accounting and financial analysis capacity. Many disputes stem not from deliberate non-compliance, but from inadequate understanding of modern accounting practices, industry-specific cost structures and legitimate commercial transactions.

Strengthening accounting expertise within tax offices would improve assessment quality, enable early detection of genuinely fraudulent cases and spare compliant taxpayers from years of repetitive scrutiny. Complementing this with artificial intelligence and data analytics could further improve risk-based selection, reduce subjectivity and enhance revenue outcomes.

A tax system that repeatedly audits compliant taxpayers undermines trust, discourages formalisation and weakens voluntary compliance. For Bangladesh to build a modern and credible tax regime, competence, consistency and finality must replace audit overload.