NBR to take legal action against VAT-shy shops

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Doulot Akter Mala
The National Board of Revenue (NBR) has decided to take legal action against small businesses that don't pay value added taxes as per their income, officials said Saturday.
Since 2002 small businesses such as shops have been paying VAT at flat rates ranging from Tk 1200 to Tk 4200 annually in an ad-hoc package system, defying the laws that require them to pay sales tax on every transaction.
The VAT department in a recent meeting evaluated the tax earning from the businesses and it has found that collection from small traders and shops is not satisfactory although some of them have been consistently posting "hefty turnovers".
"The board has decided to launch legal action against the small businesses, mainly shop owners, for non-payment of VAT," said a senior tax official.
The department's internal study has found that some shop-owners have been paying same amount of VAT during the last five years although their profits have soared every year, he said.
NBR has directed its field offices to serve notices to the VAT evaders and take legal action against non-compliant shop-owners, he said.
Under the tax laws, the NBR can impose Tk 25,000 penalty or 2.5 times the due VAT on the small businesses for non-payment of the sales tax.
Shops in the city's posh malls including Basundhara City, New Market, Rapa Plaza, Eastern Plaza, Rifles Square have been paying VAT under package deals they struck with the NBR.
Shops under Dhaka and Chittagong city corporations pay a minimum Tk 4,200 VAT and those in other city corporations Tk 3,600, municipalities Tk 2,400 and upazila (sub-district) and rural areas Tk 1,200.
Officials said shops in sub-districts have grown in size and profits in recent years following boom in the economy but they could never be brought under the tax net.
To bring the these businesses in the tax net, the government has launched the 'package VAT' system in 2002 in line with the pleas of different business associations and trade bodies.
Under the system, small businesses must make a declaration of their annual turnover in the first month of every year.
The VAT department fixes the amount of VAT the small businesses should pay based on their declarations. But the system was not followed properly.
President of Bangladesh Dokan Malik Samity (Shop owners Association) Amir Hossain Khan said the traders are ready to pay taxes.
"We want to help the taxmen collect package VAT from shops in different malls. But, the NBR should serve notices to the shop owners before filing cases."