VAT collection only 15pc of potential volume
Saturday, 4 August 2007
Doulot Akter Mala
The government has been deprived of about 85 per cent of the Value Added Tax (VAT) due to a nexus between taxmen and businesses, recent government findings reveal.
This means, only 15 per cent of the potential amount of VAT, which the National Board of Revenue (NBR) is supposed to collect, is flowing into exchequer.
According to recent findings of a government intelligence agency, the NBR could have injected a large volume of tax revenue in the national exchequer had it monitored VAT collection properly.
The intelligence agency has formed a six-member committee to scrutinise the issue and prepare recommendations to increase revenue earning from VAT.
The committee will examine the VAT collection data, volume of VAT deposited in the government's exchequer.
While visiting the city's shopping malls, roadside shops, restaurants and superstores it was found that only big shopping malls and superstores were using electronic billing system, where the payable VAT is included.
A large number of relatively small shopping malls, roadside shops, hotels, restaurants, hospitals are still unaware or unwilling to issue sale receipts to evade VAT.
The government that repeatedly failed to achieve fiscal target of tax revenue collection could easily meet its target by increasing VAT collection, sources said.
While talking to the FE, NBR Chairman Badiur Rahman endorsed the findings of the intelligence agency.
"A number of large business houses are unwilling to pay VAT although they are running profitably," he said.
Expressing his dissatisfaction over the poor VAT collection from the businesses, he said: "The government has been getting less than 10 per cent response from the large business houses in case of VAT collection."
The government has adopted some new strategy to collect more VAT in this fiscal, he added.
The board has held a series of meetings with the taxmen across the country to give them specific guidelines on collection of tax.
Recently, the NBR chief held a meeting with the VAT department to provide it specific guidelines to achieve fiscal target.
Talking to the FE, the VAT Member Mohammad Alam said: "The NBR has achieved 99 per cent of its revised target of VAT in fiscal 2006-07."
The government fixes a fiscal target after evaluating all the socio-economic perspectives so it is not true that the 85 per cent VAT remain outside of tax net of the government, he said.
In 2006-07 fiscal, the government collected VAT worth nearly Tk 124.11 billion against the revised target of Tk 124.80 billion.
"The large business houses are under surveillance to increase VAT collection," Alam said.
The VAT department has maintained 13.87 per cent growth since 1995, the VAT member said.
Asked about deploying taxmen in the businesses and shopping centres, he said: "We tried to deploy taxmen in the businesses, but it was found that some of them tightened their business transactions for the period to show lower sale volume in the record."
Apart from this, some businesses also build intimate relations with the VAT officials to manipulate the sale volume, he added.
Expressing his satisfaction over computerised billing system, the VAT member said: "The capable business houses should install such system in their outlets for the sake of transparency."
The board sent a letter to local government and rural development (LGRD) last week requesting it to monitor the installation of electronic billing system in shops, restaurants, hospitals, diagnostic centres etc.
Asked about the poor collection of VAT from retail level as well as service sector, Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) president Mir Nasir Hossain said: "The government earlier launched a participatory monitoring system to strengthen the monitoring of VAT collection at retail level, but it did not continue the measures for unknown reason."
"This could bring awareness in the retail level businesses," Hossain said. It would have been easier for a trade body to intervene the tax evasion cases at retail level if such system continued, he added.
The apex trade body in its budget recommendations had suggested for widening VAT net, which reflected in the current fiscal budget, he added.
The government should also ensure that the VAT collected from the service sector is properly deposited in the national exchequer, he said.
The proposed budget for fiscal 2007-08 has extended the VAT network bringing more goods and services into it.
The new categories of goods and services, which will come under VAT net, include immigration advisers, soft drink, mineral water, toilet soap, restaurant, warehouse, port, land developers, building construction companies, internet service providers, SIM card distributors, cinemas, WASA, insurance companies, organisers of cultural programme participated by foreign artistes, health clubs, fitness centres, sports organisations, engineering firms, chartered planes and helicopter rental companies.
The government set tax revenue target at Tk 438.50 billion for the current fiscal, up by 16.99 per cent over that of the fiscal 2006-07.
In the current fiscal, VAT is expected to contribute 36.24 per cent, import duty 21.33 per cent, income tax 24.72 per cent, supplementary duties 16.35 per cent, and other tax 1.37 per cent.
The government set target of VAT collection at Tk 158.90 billion for fiscal 2007-08.
Vat collection target was revised to Tk 136.83 billion from Tk 147.29 billion in fiscal 2006-07 followed by Tk 123.98 billion from Tk 126.75 billion in 2005-06 and Tk 106.05 billion from Tk 106.06 billion in 2004-05.
The government collected VAT worth Tk 124.89 billion, Tk 113.05 billion in fiscal 2006-07, 2005-06 respectively.
The government has been gradually receiving higher VAT revenue over that of the customs department, which is considered as highest tax revenue earner of the country.
The NBR insiders believe the government will set a higher target for VAT collection in near future due to its upward trend in revenue collection.
There should be compulsory computerised billing systems in big hotels, restaurants and business houses to make their sales transparent, they said.
The government has been deprived of about 85 per cent of the Value Added Tax (VAT) due to a nexus between taxmen and businesses, recent government findings reveal.
This means, only 15 per cent of the potential amount of VAT, which the National Board of Revenue (NBR) is supposed to collect, is flowing into exchequer.
According to recent findings of a government intelligence agency, the NBR could have injected a large volume of tax revenue in the national exchequer had it monitored VAT collection properly.
The intelligence agency has formed a six-member committee to scrutinise the issue and prepare recommendations to increase revenue earning from VAT.
The committee will examine the VAT collection data, volume of VAT deposited in the government's exchequer.
While visiting the city's shopping malls, roadside shops, restaurants and superstores it was found that only big shopping malls and superstores were using electronic billing system, where the payable VAT is included.
A large number of relatively small shopping malls, roadside shops, hotels, restaurants, hospitals are still unaware or unwilling to issue sale receipts to evade VAT.
The government that repeatedly failed to achieve fiscal target of tax revenue collection could easily meet its target by increasing VAT collection, sources said.
While talking to the FE, NBR Chairman Badiur Rahman endorsed the findings of the intelligence agency.
"A number of large business houses are unwilling to pay VAT although they are running profitably," he said.
Expressing his dissatisfaction over the poor VAT collection from the businesses, he said: "The government has been getting less than 10 per cent response from the large business houses in case of VAT collection."
The government has adopted some new strategy to collect more VAT in this fiscal, he added.
The board has held a series of meetings with the taxmen across the country to give them specific guidelines on collection of tax.
Recently, the NBR chief held a meeting with the VAT department to provide it specific guidelines to achieve fiscal target.
Talking to the FE, the VAT Member Mohammad Alam said: "The NBR has achieved 99 per cent of its revised target of VAT in fiscal 2006-07."
The government fixes a fiscal target after evaluating all the socio-economic perspectives so it is not true that the 85 per cent VAT remain outside of tax net of the government, he said.
In 2006-07 fiscal, the government collected VAT worth nearly Tk 124.11 billion against the revised target of Tk 124.80 billion.
"The large business houses are under surveillance to increase VAT collection," Alam said.
The VAT department has maintained 13.87 per cent growth since 1995, the VAT member said.
Asked about deploying taxmen in the businesses and shopping centres, he said: "We tried to deploy taxmen in the businesses, but it was found that some of them tightened their business transactions for the period to show lower sale volume in the record."
Apart from this, some businesses also build intimate relations with the VAT officials to manipulate the sale volume, he added.
Expressing his satisfaction over computerised billing system, the VAT member said: "The capable business houses should install such system in their outlets for the sake of transparency."
The board sent a letter to local government and rural development (LGRD) last week requesting it to monitor the installation of electronic billing system in shops, restaurants, hospitals, diagnostic centres etc.
Asked about the poor collection of VAT from retail level as well as service sector, Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) president Mir Nasir Hossain said: "The government earlier launched a participatory monitoring system to strengthen the monitoring of VAT collection at retail level, but it did not continue the measures for unknown reason."
"This could bring awareness in the retail level businesses," Hossain said. It would have been easier for a trade body to intervene the tax evasion cases at retail level if such system continued, he added.
The apex trade body in its budget recommendations had suggested for widening VAT net, which reflected in the current fiscal budget, he added.
The government should also ensure that the VAT collected from the service sector is properly deposited in the national exchequer, he said.
The proposed budget for fiscal 2007-08 has extended the VAT network bringing more goods and services into it.
The new categories of goods and services, which will come under VAT net, include immigration advisers, soft drink, mineral water, toilet soap, restaurant, warehouse, port, land developers, building construction companies, internet service providers, SIM card distributors, cinemas, WASA, insurance companies, organisers of cultural programme participated by foreign artistes, health clubs, fitness centres, sports organisations, engineering firms, chartered planes and helicopter rental companies.
The government set tax revenue target at Tk 438.50 billion for the current fiscal, up by 16.99 per cent over that of the fiscal 2006-07.
In the current fiscal, VAT is expected to contribute 36.24 per cent, import duty 21.33 per cent, income tax 24.72 per cent, supplementary duties 16.35 per cent, and other tax 1.37 per cent.
The government set target of VAT collection at Tk 158.90 billion for fiscal 2007-08.
Vat collection target was revised to Tk 136.83 billion from Tk 147.29 billion in fiscal 2006-07 followed by Tk 123.98 billion from Tk 126.75 billion in 2005-06 and Tk 106.05 billion from Tk 106.06 billion in 2004-05.
The government collected VAT worth Tk 124.89 billion, Tk 113.05 billion in fiscal 2006-07, 2005-06 respectively.
The government has been gradually receiving higher VAT revenue over that of the customs department, which is considered as highest tax revenue earner of the country.
The NBR insiders believe the government will set a higher target for VAT collection in near future due to its upward trend in revenue collection.
There should be compulsory computerised billing systems in big hotels, restaurants and business houses to make their sales transparent, they said.