Heated debate over VAT law

Business leaders were involved in a heated exchange of words with Finance Minister AMA Muhith during a meeting between the FBCCI and NBR yesterday over the implementation of a new VAT law.

During the exchange, the leaders threatened to take to the streets and the minister, annoyed by this, said he would stop their agitation.  

The meeting between the National Board of Revenue (NBR) and the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) at the Bangabandhu International Conference Centre in the city was attended by representatives of various trade bodies and senior government officials.

At one point, Abu Motaleb, general secretary of Byabosayee Oikya Forum, threatened to go for street agitation if the proposals and demands of small and medium businesses were not considered and met.

“If you do not accept the proposals of the FBCCI, then I think, businessmen will once again take to the street, like students, and this law will again fail. I think you will consider. There is still time. Implement the law taking all these into consideration,” said Motaleb, also a director of FBCCI.

The government is planning to implement the new VAT law termed VAT and  Supplementary Duty Act 2012 from the next fiscal year.

The new law envisages a uniform 15 percent VAT instead of the existing multiple rates now applicable to many goods and services.

However, the move raised concern among many that application of the uniform rate would increase the already high cost of living.

The NBR, however, maintains that the new law will not increase prices of goods in general as businesses will be able to get rebates.

At the event, Motaleb, one of the organisers of a demonstration by shop owners last year, said representatives of businesses met senior NBR officials 18 times with their proposals on the new VAT law. The proposals included continuation of package VAT under the new law.

The FBCCI and the NBR work on VAT, but the result is zero, he said.

He said although they were assured of their demands being met following demonstrations, “I saw in the newspaper that a uniform 15 percent tax [VAT] is going to be imposed and package VAT will not continue.”

Motaleb said, “This is a critical time. You will implement the budget and if we are to demonstrate like students, then you will fail. We, small and medium businesses, are facing tough competition.”

He cited factors such as cheap imports from neighbouring countries.

He also said traders were not trained on the new law, which will be implemented under an automated environment.

“They trained some people for show … but if regular traders do not receive training, how will they understand what the Electronic Cash Registry [ECR] is?

“We have to know it first. None of us are yet to receive training on the ECR.”

Asking to reconsider the FBCCI's proposals, he said, “If the FBCCI's demands are not accepted, we will start demonstrations.”

Finance Minister AMA Muhith then interrupted Abu Motaleb and said only 32,000 of the 8 lakh registered firms in the country submit VAT returns.

“How many of your small and medium enterprises pay VAT?” You are waging demonstration unnecessarily. If you take to the streets, you will be stopped,” said an irritated Muhith.

Then the businessmen present there began to protest the finance minister's comment.

Some stood up and began to shout.

FBCCI First Vice-President Shafiul Islam Mohiuddin attempted to calm things down.

He said businesses were still engaged in dialogue. “We are yet to see the budget. We expect that our valid demands will definitely be considered and they [the government] are working on it. Please be patient. Nothing will be imposed upon us.”

Later, Muhith suggested Motaleb withdraw his statement and said Motaleb threatened to bring the country to a halt.

“It is very unfair to issue threats here,” he said.

NBR Chairman Nojibur Rahman then said nothing could be achieved by force. “Be logical for the betterment of the nation, we will be with you.”

He said the finance minister wanted to give a lot to the businesses.

Nojibur said the NBR would remain open to discussions so that it could frame pro-people and taxpayer friendly, business and investment oriented policies.

“If you cannot respect us, do not dishonour.

"If you help us maintain our dignity, we will be serving you,” he said.

Talking to The Daily Star yesterday, a senior official of the NBR said a large amount of VAT does not go into the state coffer due to low level compliance.

A portion of VAT comes as VAT at source, the official said requesting not to be named.

It was difficult for the revenue authority to detect the source due to lack of capacity of VAT administration and collusion between field officials and dishonest businesses.