NBR plan to widen VAT net, not raising rate

The National Board of Revenue (NBR) plans to expand the Value Added Tax (VAT) net instead of raising the VAT rate in the budget for fiscal 2021-22 (FY22) to boost revenue collection.  

"We're planning to expand the VAT net. Along with it, we will take steps to plug holes in the tax system in the budget for FY22 to recover from the pandemic-induced revenue losses," said VAT (policy wing) member Md Masud Sadiq recently.

He said the NBR continues to hold meetings with various stakeholders, including trade bodies, to make the next budget inclusive and participatory so that the revenue authorities can fulfill the revenue collection target to finance the government's development projects.

"The NBR wants to assure the businesses about its sincere and earnest efforts to work hand in hand with them in overcoming the damage being caused to the economy following the outbreak of the Covid-19 pandemic in March 2020," Sadiq added.

The issue of VAT has become the most talked-about matter in recent years because of the introduction of new VAT law as a section of the business community, especially retail-level people, has been opposing it. The new law adopted in 2012 took seven years to be enforced in 2019. However, the new law had lost much of its bite because of several amendments pushed by the businesses.

Terming the NBR's efforts as pro-business, Sadiq said considering the interest of businesspeople, NBR earlier adjusted the paid Advance Tax (AT) through the simplified VAT rebate process at the time of submission of monthly return.

The NBR while addressing the challenges of full enforcement of the new VAT law would also look into the problems faced by businesses, he added.

The NBR will prioritize the automation of the VAT administration for successful implementation of VAT law, he said, while adding that that would require higher administrative efficiency and manpower to ensure better monitoring and improved services to the taxpayers.

While presenting data about VAT collection situation he said the contribution of tobacco, cement and telecom has been satisfactory, to some extent, during the pandemic. Yet it was not up to the level expected by the NBR, he added.

The VAT policy member said the NBR could not mobilize enough revenue from the gas sector as it waived 93 per cent supplementary duty levied to keep the price of gas affordable.

He said revenue collection from the cement sector recorded significant growth because of the execution of several large infrastructure projects.

He said proper automation of VAT administration is the only way to narrow down VAT evasion.

Collection of VAT witnessed a 15 per cent growth in the month of March alone compared to that in the corresponding month last year.

In the first three quarters of FY21, VAT collection from large taxpayers grew by 9.17 per cent, according to the latest data of the NBR.

Until March, the LTU collected Tk 30.40 billion more VAT than that in the previous (FY20). Three sectors - cigarette, pharmaceuticals and mobile phone - made an impressive contribution to revenue collection efforts of the NBR during the first three quarters of FY21 despite Covid-19 pandemic.

Taxpayers under the Large Taxpayers Unit (LTU) under the VAT wing contributed to the growth in revenue collection in the July-March period of the FY21, said NBR sources.

Until March, the unit collected Tk 30.40 billion more VAT than that in the previous fiscal (FY20).