Strategy for procedural reforms in VAT

In my previous two articles, published in this daily on August 02 and August 08, I argued that procedural reform is the key to VAT reform in Bangladesh. I further argued that procedural reform has two dimensions. One is simplifying the existing procedures in the VAT system of our country which are complex. The other is, there are no procedures in many cases where new procedures should be frames. The previous two articles emphsised on the need to give effect to VAT reforms. In this article, a strategy has been suggested to carry out reforms in those two areas.
The work of procedural reform is not easy. There are a few aspects of procedural reforms. First, involvement of many people is not required in procedural reforms. Only a team of few people adept in VAT procedure can take lead in procedural reforms. Socondly, it does not require adoption of a project involving huge amount of money to effect procedural reform. Rather a few selected officials, if they are properly directed, can carry out such reform in the course of their routine work.  Thirdly, there is a dearth of such officials who are adept and interested to work with procedural reforms team becuase such reform job is very tedious and other jobs are easy and interesting in nature.
Under the above circumstnaces, the policy section of VAT Wing of NBR (National Board of Revenue) can take the lead or asked to undertake the lead of procedural reform programmes. In the VAT Policy Section in NBR there are a few clerical staff, one Second Secretary, one First Secretary and one Member. Above the Member is the Chairman, NBR. A few more officers interested to work in procedural reform initiatives can be posted under Member, VAT Policy. Or a group of such officers can be selected and they can be given additional responsibility to do this job. However, additional responsibility shall not work well for understandable reasons. From the private sector as well, a few interested persons can be inducted into the team. There are some people in the Chartered Accountant firms who have good practical knowledge on VAT. In the industries, there some executives who are well adept in practical VAT. The services of these practitioners are of utomost importance to effect procedural reforms in VAT.
Such a team can be given responsibility to revise the existing VAT procedure on every VATable economic activity and frame procedure where there is no procedure. Thus, General Orders (GOs) can be issued on these economic activities. This job is long overdue.
Another pertinent suggestion is the introduction of life-long career in VAT Policy Section. VAT Policy Section, a very important section of policy formulation, is manned by officials and staff who come there to work for a certain period of time. This does not contribute to the development of skills to undertake such procedural reforms. A deeper understnading of all aspects of the VATable economic activities is required to lay down practicable procedures. Presently, the officials and staff can not develop such deeper understanding and generally do not retain enough zeal to obtain deeper and exhaustive understnading about VATable economic activities since they know that after a few years or so they will be posted anywhere else. They need, instead, have a feeling that this knowledge is key to the success in their career. They have to obtain, update and retain such knowledge for performing their duties properly and for the development of their career. In the Legislative and Parliamentary Affirs Division under the Ministry of Law, Justice and Parliamentary Affairs, officers remain posted in the same division throughout their career since they are involed in the drafting of law. The nature of the jobs is same in the three policy sections under NBR (VAT policy, income tax policy and customs policy).
There is a dearth of officials and staff who are able and interested to work for a long time in VAT procedure, so the senior management has to adopt some measures to find and retain such officials and staff. There are certainly some officials and staff who will be interested to work in VAT policy for a long period. Even the senior managers can formulate policies to provide them lawful incentives in various forms to retain them in the policy making job.
Thus, if a team can work for about a year, General Orders, Special Orders, Explanations, etc., can be issued on all VATable services, different industries and business establishments and various VAT functionalities. An exhaustive and simplified VAT procedure is a must to have a business-friendly and revenue-friendly VAT envoronment in Bangladesh. When people understand the procedure, sefl-compliance will increase and consequently there will be increase in revenue collection. Proecedural difficulties are one of the hindrances to establishing a standard VAT system in the country. So, procedural reform in our VAT system is the need of the hour. This deserves utmsot thoughts and attention.        
Dr. Md. Abdur Rouf is Director of the Central Intelligence Cell and Deputy Project Director of the VAT Online Project, National Board of Revenue (NBR). The opinions expressed in this
article are of the writer and do not reflect his official position.
 roufcus@yahoo.com