Firms claim lower turnover to avoid actual VAT

Many businesses are claiming lower annual turnovers to avoid paying regular value-added tax rates, said National Board of Revenue Chairman Md Mosharraf Hossain Bhuiyan.  

“We have noticed that most of the businesses are trying to claim that their annual turnover is less than Tk 3 crore. This can’t be. This is a very small amount,” he said.

“Businesses should be aware about this. At the same time, revenue officials should be mindful so that domestic resource mobilisation does not get affected,” he said at an event at the InterContinental Dhaka hotel.

The NBR and Bangladesh Investment Climate Fund-II jointly organised the event to unveil the Customs Modernisation Strategic Action Plan 2019-2022 book.

The International Finance Corporation (IFC) implemented the BICF-II, funded by the UK’s Department for International Development.

The tendency came about among the businesses after the government fixed the upper limit of turnover tax under VAT at Tk 3 crore. A four percent turnover tax is slapped on businesses raking in Tk 50 lakh to Tk 3 crore in annual revenue.

But firms recording more than Tk 3 crore in yearly turnover have to get VAT registration. Once VAT-registered, firms will have to pay VAT at regular rates -- from 5 percent to 15 percent -- applied on goods and services, according to revenue officials.

Bhuiyan said installation of electronic fiscal devices (EFDs) was vital to ensuring that sales were properly recorded so that the NBR gets the actual amount of VAT, a type of consumption tax paid by end-consumers.

He instructed officials to speed up procurement of EFDs and scanners.

The NBR chairman also asked revenue officials to enhance their efficiency by adopting modern technologies.

Bhuiyan said many projects were taken in the past but the success of the projects did not sustain because of negligence and whimsical attitude of the officials.

“It is not expected that after the completion of a project, we will remain at the same position where we had been at the beginning of it.”

The Strategic Action Plan (SAP) will be implemented in the next three to four years.

“Benefit will never come if foreign consultants and officials of the World Bank along with four to five NBR officials work under a project. Many of us have to be involved,” Bhuiyan said.

According to the NBR chief, modernisation of VAT system is also vital along with modernising the customs administration in order to increase revenue collection.

Prime Minister’s Economic A­ffairs Adviser Mashiur Rahman said framing the best plan would not facilitate trade and businesses alone. Improvement in behaviour of customs officials is necessary, he said.

He suggested the customs department rationalise tax and the tariff system and reduce tariff gap between goods imported duty-free under the bonded warehouse privilege and the goods brought in paying duties.

Rahman said the customs should not keep any imported goods confiscated beyond the time period after which demurrage charges are slapped by the port authorities.

Siddiqur Rahman, vice-chairman of the Federation of Bangladesh Chambers of Commerce and Industry, urged the authorities to take comprehensive measures to ease the process of doing business and improve investment climate in order to attract foreign investors.

“Make the process of doing business easy for those who want to do business complying rules,” he said, suggesting taking measures against dishonest businesses and corrupt officials.

Khondaker Muhammad Aminur Rahman, member for customs modernisation at the NBR, said various measures have been taken to upgrade customs to improve business environment and facilitate international trade.

M Masrur Reaz, senior economist of World Bank Group, Singapore and programme manager of the BICF-II, said the SAP was time-bound and result-oriented.

Md Raich Uddin Khan, first secretary customs of the NBR, said the SAP was a comprehensive policy instrument, which guides customs to provide the best services.