CPD: Clarify new VAT law before budget

Published in Dhaka Tribune  on Tuesday 9 April 2019

The Value Added Tax and Supplementary Duty Act 2012 was supposed to be implemented in FY 2017-18 after some foiled attempts but the government was again forced to suspend it for two more years in the face of traders’ protests.

The Centre for Policy Dialogue, a local think-tank, has urged the government to clarify the new value added tax (VAT) law to traders and stakeholders so that it can be implemented easily from upcoming fiscal year 2019-20.

“People do not yet have a clear idea of how the government will implement the law and how VAT will be calculated,” said Towfiqul Islam Khan, senior research fellow at the CPD.

He came up with the remarks while addressing a pre-budget talk with the National Board of Revenue (NBR) on Tuesday at NBR office in the capital.

NBR chairman Mosharraf Hussain Bhuiyan along with other NBR high officials, senior research associate of CPD Muntaseer Kamal and some other economists took part in the discussion.

Khan urged the NBR to arrange a discussion before the budget session and remove all confusions about the new act otherwise people would have a bad impression about NBR’s intension.

The Value Added Tax and Supplementary Duty Act 2012 was supposed to be implemented in FY 2017-18 after some foiled attempts but the government was again forced to suspend it for two more years in the face of traders’ protests.

As per the decision of the government, the act will be effective from 2019-20 fiscal.

However, the CPD believes that the act needs major amendments with the addition of some new issues for its better acceptability.

“It will be great if the government takes the initiative for amendment before placing the budget for the upcoming fiscal year,” said the senior research fellow of the CPD.

Khan also noted that for the new act to be implemented, automation of NBR and VAT collecting system was a must, what the NBR was yet to do fully.

“Without the automation process,” he remarked, “the NBR will not able to raise revenue income from value added tax substantially.”

On raising revenue, he said the country’s tax-GDP ratio must be increased to 14% by FY 2020 to achieve the goals of the 7th five year plan.

“We are still away from this percentage,” he observed.

On the other hand, Khan said the government was providing tax incentives for some sectors.

“But there is no exact estimate of how much the government gives in incentives. The data should be calculated so that the NBR can give an exact figure in case of any debate over revenue shortfall,” he suggested.

Besides, the researcher suggested that NBR should bring under its monitoring tax identification number (TIN) holders, who were not submitting return and were dodging government revenue.

The NBR could make phone calls, send SMSs or email the TIN holders reminding them of return submission and tax payment. The initiative would create a bit pressure on the TIN holders, the CPD official said.

“However, some people are paying tax (tax deducted at source) to agents but the agents are not submitting it to the NBR. And the matter of regret is that the taxpayers have no way to know if their money reached the NBR or not,” said Towfiqul.

In this case, the NBR could use new technology used by other countries, he suggested.

The CPD senior researcher suggested that NBR formulate a business-friendly, not only traders-friendly, budget proposal.

Apart from traders, officials, workers and many other people were engaged in business, he added.

The NBR chairman said that they took CPD’s recommendations for consideration.

He, however, stressed that new VAT act implementation was urgent and that the reformation or amendment would be made later, considering the suggestions.

The NBR chief said that they had cleared some issues regarding the act, including multiple slabs and package VAT etc, while some other issues would become clear later as they should not publish all things before budge placement for maintaining secrecy.