Enforce new VAT law leniently: ICAB
Chartered accountants yesterday urged the government to enforce the new VAT law leniently in the first six months, so that businesses can get accustomed to it.
“We suggest implementing the law in a friendly manner instead of going hard from the beginning,” said Mohammed Humayun Kabir, chairman of tax and law committee of the Institute of Chartered Accountants of Bangladesh or ICAB.
“Taxpayers need more time before transition from the existing law,” he said, after a pre-budget meeting with revenue officials at the National Board of Revenue.
Framed at the prescription of the International Monetary Fund, the VAT and Supplementary Duty Act 2012 is expected to be effective from July, replacing the present VAT Act 1991.
The new law envisages a flat 15 percent value added tax rate, replacing different VAT rates now in force for goods and services.
The enforcement of the new law is likely to fuel the cost of living as prices of many goods and services such as rod, electricity and edible oil may rise because of an abolition of VAT waiver for nearly 2,000 products and services as well as the privilege of reduced VAT rates.
Various local industries will face increased competition with imported goods as the supplementary duty will be applicable for 170 products, down from the existing 1,362, according to a NBR document.
The ICAB said there is a basic difference between present and new VAT laws. Taxpayers need adequate preparation and training for proper implementation of the new law. They will require at least six months to prepare, once the rules are notified under the new law, it said. The revenue authority is yet to issue the rules under the new law.
Kabir also suggested imposing regulatory duty on items so that domestic industries can compete with imports, following reduction of the supplementary duty under the new law.
“There will be cascading effects if the domestic industry is affected. It will also impact revenue collection.”
The ICAB also recommended opening a separate tax office to ensure that owners of cars comply with the rules of tax return submission for vehicle registration and renewals. “The government will be able to collect more revenue. It will also ensure parity with tax return submission and car registration,” said ICAB.
The Institute of Cost and Management Accountants of Bangladesh or ICMAB said the VAT rate should not be more than 10 percent.
Presently, the truncated VAT rates ranging from 3 percent to 9 percent are applicable to many goods and services, which will be increased to 15 percent and shall be burdensome for the taxpayers, according to ICMAB.
“Taxpayers will tend to misreport turnover, to avoid the tax burden,” said ICMAB President Arif Khan, adding that a 10 percent VAT rate across the board shall ensure the desired revenue collection and encourage taxpayers to go for voluntary compliance.
The ICMAB also suggested imposing a 5 percent higher tax for foreign banks that are operating here by opening branches. “This will encourage foreign banks to get incorporated in Bangladesh and be listed on the stock exchanges,” said ICMAB. Khan also suggested increasing the tax-exempted limit on dividend income.