Hand-to-mouth labourers' wages to get VAT waiver

Some relief from the catch-all tax dragnet may be forthcoming for people on the lowest rung of society as the interim government contemplates waiving VAT on day-labourers' wages.
Officials say the measure is being mulled over to address longstanding inconsistencies within the VAT law, which spares none -- nor even a pauper -- from paying the value-added tax.
Currently, a 15-percent VAT is charged on the wages of day labourers who live from hand to mouth with earnings from daily work.
Officials in the VAT department of the revenue board are authorized to collect the tax from employers.
They have said that the VAT on day-labourers' wages is not classified as an exempted service under current legislation, leading to confusion among taxpayers.
VAT practitioners have long demanded clarity on this issue, highlighting the lack of proper definitions in the VAT law regarding such services.
Under current regulations, some services are categorized as 'economic activities', but the wages of day labourers are not included in this classification.
On this score, a senior revenue-board official has said, "We need to define wages as non-economic activity to facilitate exemptions."
While services provided by an employee to the employer are exempt from VAT, there remains uncertainty as to whether day labourers fit in this definition.
Dr Md Abdur Rouf, a member of the VAT implementation and IT wing, sent a note to the VAT policy wing with request for clarification on the status of day-labourers' services.
He points out that day-labourers are not on the VAT-exempt services' list, unlike other professionals such as journalists, actors, and musicians whose wages are clearly outlined as exempted.
"The inconsistencies present in previous VAT laws from 1991 and the current version from 2012 have not been adequately addressed despite previous reports," he said.
The revenue official suggests that amendments to the provisions should be included in the next budget, but emphasizes issuing a clarification dispelling confusion at the field level of VAT operations.
In his note, Dr Rouf indicated that some VAT officials impose the 15-percent tax on labour payments, including loading and unloading expenses, during audits of company financial statements.
Companies subject to VAT have raised concerns about such inconsistent practices from officials, as some do not apply this tax.
Such discrepancy creates disputes between VAT officials and businesses, particularly impacting the construction sector.
The number of day-labourers is increasing day by day due to uncertainty in the employment situation.
There is a lack of reliable data on the number of such gig workers in Bangladesh, as many belong to a floating population migrating from rural areas to urban centres for work.
However, Bangladesh Bureau of Statistics (BBS) Labour Force Survey 2017 found some 8.3 million day-labourers in the employment-scant country.

[email protected]