The tax authority has reduced its revenue officials' discretionary power to penalise businesses for VAT evasion, a move that is expected to give entrepreneurs relief from the fear of harassment and rent-seeking behaviour.
The revised VAT law by the National Board of Revenue stipulates that officials can now release the businesses' goods after imposing a fine that is one-fourth to half of the evaded VAT amount instead of confiscating the goods altogether.
The move comes in response to complaints from businessmen of harassments in the hands of a section of VAT officials due to an ambiguity in the law.
In the absence of a well-defined law, certain revenue officials earlier slapped redemption fines on VAT evaders as they thought 'appropriate,' which put businesses at risk of harassment. Insiders said officials sometimes imposed fines as they wished and it could be either very high or very low penalty, as there was no limitation of their discretionary power.
In his budget speech, Finance Minister AMA Muhith spoke of taxpayers' distress owing to the discretionary power by officials and proposed to cut their authorities by fixing maximum penalty in lieu of confiscation of goods “to create a taxpayer-friendly environment”.
“It is indeed a respite for us. It will reduce our cost of doing business, which will ultimately benefit the consumers,” said Abdul Haque, a director of the Federation of Bangladesh Chambers of Commerce and Industry.
The Centre for Policy Dialogue and leading trade bodies also lauded the step.
Currently, of the 8 lakh business entities, more than 6 lakh submit their VAT returns regularly.
VAT or indirect tax is the main source of revenue for the state, and the government aims to collect 37.74 percent of fiscal 2014-15's total revenue target of Tk 149,720 crore from this source of tax.