Fragmented EFD installation foils revenue purpose

Fragmented installation of electronic fiscal device in retail shops in a market or area won't help plug VAT leaks, even if done through a third party, experts say and suggest a well-calibrated blanket coverage.
Businesses and economists both agree on this point, and they have urged the government to address the limitation in digitizing VAT collection and ensure bringing onboard all shops in an area to popularize collection of this all-encompassing tax.
Such hold-all coverage with the EFD machines is also deemed imperative to create a level playing field for businesses, as those pay naturally lose out to those who don't.
Retail and wholesale businesses have found it as one of the major challenges for the National Board of Revenue (NBR) to get their support as such differences affect their business-competitiveness.
Talking to this correspondent, some of the salesmen in Dhaka's Bailey Road, old Dhaka and Mogbazar said the government should supply such device "to all outlets in an area at a time to create a level playing field".
Businesses that do not collect VAT from consumers can offer a cheaper price than that of the shops paying the tax through the device, they argued.
According to the findings by Bangladesh Bureau of Statistics (BBS) last year, there are more than 4.0 million retail trade establishments across the country. The National Board of Revenue targets to install some 0.3 million EFDs in Dhaka and Chattogram in the next three years--60,000 per annum.
Abu Motaleb, director of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), says currently the government is not getting proper amount of VAT from the retail and wholesale shops as the devices installed earlier went out of order, although those had created discrimination.
According to VAT authorities' data, the NBR receives 2.5 per cent of estimated VAT from retail and wholesale businesses.
"We are now paying vat in a haphazard system, neither through devices nor manually in real sense," he adds.
He mentions that the government earlier had installed the devices in few shops in a market, leaving the majority behind, which has triggered agitations among the businesses on adoption of the electronic devices.
"We are ready to pay a lump-sump amount of vat now until the NBR prepares to install it uniformly in all businesses in an area or market," the director of the Alex trade body says about their position on taxing all across the board.
Suggesting that the revenue authority install electronic devices at all eligible business points as fast as possible, Distinguished Fellow of the Centre for Policy Dialogue (CPD) Dr Mustafizur Rahman has said blanket coverage of particular markets and localities should be ensured.
"Otherwise, if, for example, only some shops in a market have the EFDs installed and others don't, the former are disadvantaged vis a vis the latter and, consequently, are discouraged from complying with government regulations," he said.
President of Dhaka Chamber of Commerce and Industry (DCCI) Sameer Sattar feels that the government need to impart training to the retail outlets to operate the devices.
"Efficient company has to be appointed to bring discipline in EFDMS," he says about one remedy for the VAT malady.
Mr Sattar, however, has laid emphasis on automating VAT collection in a bid to minimize business community's allegation on harassment.
Dr Mustafizur Rahman emphasizes that digitisation of taxation "must be seen as a must in view of Bangladesh's dismal revenue"generation scenario".
"The number of business entities in Bangladesh that pay VAT to the government is lower than the number of entities that collect VAT, and the number of entities that collect VAT is lower than the number of businesses that should collect VAT," he said.
"Some businesses managed Vat officials to escape from the automated system while honest businesses suffer."
Talking to the FE writer, a VAT commissioner acknowledged that the devices installed earlier were by now out of order in his zone, like other zones, for not having back-up support from the vendor.
"The battery lifetime of the machines was one year. Now, battery of the EFD is not available in the market to resume its operation," he said, indicating nagging teething troubles with the digital device.
The NBR started installation of EFD in 2019, and by now, many of the devices have been non-functional, he added.
Dr Ahsan H Mansur, Executive Director of Policy Research Institute (PRI), notes that there is no harm to update the machine but its monitoring is important to make the initiative a success.
However, some of the field-level vat officials express doubt about making the initiative successful through third-party role play, sans legal authority.
"Despite having legal authority, vat officials could not see success on the move due to both non-cooperation of businesses as well as some vat officials," says one.
He suggests that a strategic plan has to be devised for the device installation in an area or a shopping mall with the help of the field-level VAT officials.
Former VAT member Jamal Hossain hails the move on operating EFD through third-party involvement as "a good initiative" which he feels needs some time to show result.
From his imperial experience from an arduous exercise with the switch to electronic system of tax collection, he says, "The journey with electronic devices was not smooth due to several challenges coming from businesses as well as vat officials."

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