Package VAT collection below potential

FT ONLINE

The collection of package Value Added Tax (VAT) from small businesses has recorded a decline during the past three fiscal years, the officials said.

They said most of the small businesses under the package VAT are not paying their dues to the public exchequer.

The government had doubled the package VAT rate in the budget for the fiscal year 2016-17.

The officials also observed that the sluggish trend had begun following retail businesses' protest against the provision incorporated into the new VAT law for withdrawing the package VAT.

The government deferred the implementation of the new law, which was scheduled to be made effective from last July, for two years, until July 01, 2019.

An analysis of the VAT wing found that the National Board of Revenue (NBR) received Tk 11.75 billion package VAT until February of the current fiscal year.

The amount collected in FY 2015-16 was Tk 23.81 billion. But the collection declined to Tk 18.91 billion in the FY 2016-17.

The VAT wing on Wednesday sought cooperation from the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) in this regard.

In a letter to the FBCCI president, the VAT authorities requested the apex chamber to ask all its member trade bodies to support this issue.

The NBR made the request to ensure proper VAT collection from the small and retail businesses across the country.

Under the VAT Law 1991, the amount of package VAT was fixed on the basis of the jurisdiction of businesses across the country.

The NBR estimated an annual value addition of businesses and fixed a lump sum of package VAT at a rate of 15 per cent on the amount.

For Dhaka North, South and Chattogram City Corporation, the amount is Tk 28,000. It is Tk 20,000 for other city corporations.

The amount of package VAT is Tk 14,000 for small businesses in district towns and Tk 7,000 for other areas.

"Package VAT collection is currently unsatisfactory. It has been showing a declining trend…," wrote Tarek Rikabder, first secretary of the NBR's VAT policy wing.

In the FY 2016-17, the NBR increased the amount of package VAT twofold. The previous amounts were Tk 3,600, Tk 7,200, Tk 10,000 and Tk 14,000.

Officials said many small businesses are not paying the VAT after its sharp hike.

Solaiman Parsee, a businessman in old Dhaka, blamed the intervention of a section of field-level VAT inspectors for a decline in the package VAT collection.

Those officials take bribes from the small and retail-level businesses and discourage them to pay the VAT to the government in right amount, he said.

"Our association has some 1,300 members who are willing to pay the package VAT. But most of the time, a section of VAT officials motivate them against such payment and seek bribes, instead."

Mr Parsee said the present package VAT amount is not a burden as a small business has to pay only Tk 76.71 daily to the government on an average.

FBCCI president Shafiul Islam Mohiuddin also holds the same view.

He said a dishonest section of VAT officials tries to motivate businesses to pay bribe which is less than the payable amount of package VAT.

Mr Mohiuddin gave assurances to extend all-out cooperation to the government for collecting package VAT properly. "We'll raise awareness among the businesses and send a letter to the association in this regard," he added.

He, however, said the government should help the marginal businesses to grow.

Some 80 per cent of the VAT comes from large businesses. So, the government should focus on those businesses, he mentioned.