VAT automation to take off

The National Board of Revenue (NBR) has finally taken a step in the right direction. It has decided to install, what is termed "Electronic Fiscal Device Management System (EFDMS)" and signed a Memorandum of Understanding with a publicly listed company to that effect back in November 2022. The object is to install 60,000 EFDMS every year to cover 300,000 over the next five years. Reportedly, this system will be aligned directly with NBR servers and hence, Value Added Tax (VAT) collection will become smoother to monitor. This makes a lot of sense as VAT constitutes a major revenue source for the NBR.

Today, third parties are involved in collecting taxes in other more advanced economies. While it is too early to comment on the efficacy of the model adopted by the NBR, it is certainly a step in the right direction. The government has been taking steps to digitise many of its services, but the NBR has run into all sorts of difficulties in its efforts to do what should have been done years ago. Obviously, any digital method will displace manual checking and that may have been the crux of the problem in terms of delayed implementation. Change for the greater good is often sidelined to benefit a few who become stumbling blocks to positive developments.

Policymakers are keen on making a 'Digital Bangladesh'. Now we have 'Smart' Bangladesh. From the report carried in this paper, it is understood that the company involved in the software design is mandated to provide technical support beyond hardware maintenance; it will also be involved in marketing of the software to end-users. But if this is to work well, shouldn't the NBR be making the use of this software mandatory at retail level? Surely the adoption of this technology does not have to happen in a day, but as experience tells us, people are extremely resistant to change of any kind. While the awareness-building side of things needs to happen in a concerted manner prior to actual roll out, other things need to be in place too.

Public relations are one part of the equation in getting something like this off the ground. However, work at the back end of this system must be up and operational prior to public launch. Since 60,000 EFDMS installations are going to happen every year, the infrastructure will require to handle issues (and there will always be issues when one talks about software and hardware) in real-time to expedite solutions within shortest possible timelines. The idea of this system is not new globally, but it is new in Bangladesh. NBR needs a seamless system to collect VAT and a platform, such as this, equips the revenue authority with up-to-date information about every retailer. Retailers too are freed from possible harassment.

This scenario ought to be ideal where the digital system works without a hitch. The country has a checkered past with its reliance on foreign vendors. The greatest example of bungling was when the government contracted a foreign company for machine readable passports which brought untold misery to both the authorities and citizens requiring new passports. It is hoped that policymakers have learnt from past mistakes and the deal concluded by the NBR allows for the revenue authority to have full control of the information regardless of any third party making the software. After all, the database will contain detailed information of retailers and that information must be privy only to the NBR.

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