Services sector calls for single digit VAT

Operators in the services sector yesterday urged the government to bring down the value-added tax rate to single digit in the upcoming fiscal year from the existing 15 percent to boost their business.

The appeal came at a discussion organised by the National Board of Revenue with businesses as it gears up to frame the proposal for revenue measures for fiscal 2016-17.

“We, the businesses, want that you will make our roads to the future smooth,” said Abdul Matlub Ahmad, president of the Federation of Bangladesh Chambers of Commerce and Industry, at the discussion, which was held at the NBR headquarters in Dhaka. Senior tax officials, including NBR Chairman Md Nojibur Rahman, were present at the discussion.

Ahmad said some of the businesses might find it tough to afford 15 percent VAT once the VAT system goes online under the new law. Subsequently, he suggested the rates between 4 percent and 7 percent.

The FBCCI president said the businessmen want to pay tax and VAT, and they will come forward if the papers and procedures are simplified.

Collecting the 15 percent VAT is difficult for the roadside restaurants, said the Bangladesh Restaurant Owners Association. The platform urged the NBR to calculate VAT based on 20 percent value addition.

BM Harun ur Rashid, secretary of the Bangladesh Dress Makers Association, echoed the same.

Citing the imposition of 4 percent trade VAT on superstores, Kazi Inam Ahmed, vice-president of the Bangladesh Supermarket Owners Association, said the superstores find it tough to compete with the retailers, who sell similar products but pay package VAT or a fixed amount.

Since 2000, some 120 superstores have opened and these have been able to address the food safety concerns. But more than 20 of the chain stores have closed operations in recent years because of a decline in customers for the imposition of the 4 percent VAT, he said.

He called for a level-playing field for the superstores, seeking package VAT or a fixed amount like the retailers.

He also said superstore owners have to pay a very high import duty to bring in machinery, such as refrigerators, for their stores.

Asif Ahmed, finance director of Pan Pacific Sonargaon Hotel, said guests have to pay 15 percent VAT on services whereas the VAT rate is in single digit in various neighbouring countries. A 7 percent VAT will facilitate tourism, he said.

Rafiuzzaman, vice-president of Tour Operators Association of Bangladesh (TOAB), said the operators bring half a million foreign tourists a year.

And to facilitate their movement around the country, TOAB called for allowing duty-free import of vehicles and vessels. He also demanded cuts in the VAT rate.

Shahid Serniabat, president of the Printing Industries Association of Bangladesh, said the local printing firms face unequal competition with foreign firms in government tenders for textbooks because of the high duty on paper import, which currently stands at 61 percent.

“We earnestly request for zero-duty import privilege for the import of papers for textbooks.”

He also demanded that VAT on printers be based on the number of printing machines instead of a flat 15 percent for all. Such rates will affect the small printing firms, Serniabat added.

Tofayel Khan of the Bangladesh Textbook Publishers Association questioned the rationale behind charging 61 percent duty on the raw material for books, which is paper, when the import duty on the finished product is zero. “Please spare us from this discrimination.”

Khan also alleged that the papers and covers imported free of duty under the bonded warehouse privilege end up in the markets.

Osman Gani, president of Bangladesh Gayan O Srijonshil Prakashak Samity, a platform of publishers of creative books, said the government gives duty protection to support local paper mills, but the mills sometimes increase the prices of papers seeing an uptick in demand.

He cited the month of February when thousands of books are published targeting the book fair as a case in point. “It is not clear to us why the local printing industry is not getting any support,” he added.

Alamgir Khan of Bangladesh Paper Importers Association said many of its members have to quit the trade after falling victim to the misuse of bond privilege.

“You will find abundant papers in markets such as Nayabazar. But most of the papers are coming due to leakage in bonded warehouse,” he said, while urging the NBR to create a level-playing field.

On the issue, FBCCI President Ahmad said many businesses are facing difficulties due to misuse of the bonded warehouse privilege. “It should be taken care of,” he added.

In response, NBR Chairman Rahman said the revenue authority has already taken various steps to prevent the abuse of the bonded warehouse facility.