Half of GDP remains exempt from VAT
FE REPORT | Monday, 6 February 2023
Around half of Bangladesh's gross domestic product (GDP) remains out value-added tax (VAT) purview in the form of exemption, an analysis show, narrowing scope of revenue receipt.
In a keynote presentation at a meet held Sunday on the occasion of a two-day revenue conference, VAT Commissioner Syed M Mushfequr Rahman said VAT is exempted on agriculture, livestock, fisheries, education, health, public administration, defence and social-safety net that contribute 14.6 per cent to the country's GDP.
The tax-GDP ratio is one of world's lowest in Bangladesh, which is below 10 per cent.
Mr Rahman named 15 major sectors that enjoy exemption worth Tk 19 trillion.
He said there is a need for conducting intensive research on the economics of tax waiver.
Recently, the International Monetary Fund (IMF) tagged one of its major conditions--to narrow the scope of tax exemption-to disbursement of US$4.7 billion in loan.
The National Board of Revenue (NBR) organized the seminar on VAT at the two-day revenue conference, inaugurated by Prime Minister Sheikh Hasina, who gave a direction on taxing-that the government won't increase tax burden on existing taxpayers rather cast wide the tax net to enhance the number of taxpayers.
Commerce Minister Tipu Munshi attended the programme as chief guest while Attorney-General Abu Md Amin Uddin was special guest. NBR Chairman and Senior Secretary of the Internal Resources Division (IRD) Abu Hena Md Rahmatul Muneem chaired the seminar.
Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) senior vice-president Mostafa Azad Chowdhury Babu, Foreign Investors Chamber of Commerce and Industry (FICCI) president Naser Ezaz Bijoy, incumbent and former NBR members also spoke.
Commerce Minister Tipu Munshi said the NBR should focus more on VAT-and income-tax collection as the scope of customs duty would squeeze after the country graduates to middle-income status.
He laid emphasis on investing more in infrastructure and logistics of the tax authority to build their confidence to the taxpayer end.
"The NBR will have to motivate the taxpayers for expanding tax net and mobilizing revenue from internal sources," he said.
Attorney-General Mr Amin Uddin said the number of revenue cases could be minimized if the tax officials kept contact and cooperated with the attorney-general's offices with required information. The NBR chairman finds the pace of raising the share of VAT in the aggregate revenue collection in right gear.
"The VAT net will expand if the NBR can ensure transparency in retail transactions," he told the meet. FBCCI leader Mr Chowdhury said some 60 million people are paying holding tax while only 7.0 million are registered taxpayers.
"The NBR should carry out survey like population census to find out people remaining out of tax net," he said.
He alleged that government is losing revenue due to connivance of businesses and tax officials. The NBR will have to strengthen its VAT intelligence team to check such irregularities, he said.
The FICCI president said some 215 members of the chamber contribute 30 per cent to the VAT collection of NBR.
"It shows the level of non-compliance of other businesses who are evading VAT," Mr Bijoy said.
He demanded following transaction value as assessment value at the customs point instead of referring to the last transaction value.
The FICCI president suggested doing away with the manual return-submission system and introducing cash-less transaction to ensure efficiency.
Former NBR member Syed Golam Kibria said the investment in NBR should be increased to improve its research and statistics and IT wing.
He suggests annual review of the tax exemption to trim it down as some sectors are enjoying the benefit for long without having major significance.
NBR member Dr Moinul Khan held a lottery of the Electronic Fiscal Device (EFD) at the seminar.
NBR member and convener of the Revenue Conference organizing committee Dr Md Shahidul Islam said the internal revenue mobilization is fuel for the economy that also contributed to building the Padma Bridge.
VAT commissioner (South) Showkat Ali Saadi said the VAT department made significant development on digitization of services riding the new VAT law.
He hoped the NBR would have a rich databank by next three or four years as currently 70 per cent of the returns are submitted online.