Pay VAT not just to fill govt coffer This week is going to be Value Added Tax(VAT) week. VAT plays a crucial role in filling govt's coffer. 31 years ago when then finance minister Saifur Rahman introduced the VAT very few thought it would account mammoth share of government’s revenue. By any standard it was a bold and visionary step back then.Mr Rahman,who lost his life in a tragic road accident in 2009,was criticized right and left for the move.Nevertheless,he implemented the plan and now we are reaping its benefits. In 1991-92,VAT revenue represented Tk 16.775 billion and income tax revenue was Tk 13.00 billion. In 2015-16,VAT revenue was Tk 539.16 billion and income tax revenue was Tk 517.96 billion. In 2021-22,VAT revenue was Tk 1.27 trillion and income tax revenue was Tk 1.05 trillion(Source:BER 2021).Earnings from VAT overwhelmingly dominate govt’s total revenue earnings. Though many people’s income slips through the income tax net,VAT touches people from all walks of life.Peasants, workers,housewives, unemploymed all pay VAT through their daily transactions. All goods and services are subject to 15% VAT regulations. Govt uses the VAT money to pay subsidy and other expenses.Though mismanagement in public banks put them into precarious position,govt keeps funding these banks using taxpayer’s money to run operation. On the other hand,duties and taxes on export items are still low. Many exporters do not bring their money back home and pay a very low source tax,1%. Yet they receive regular subsidy.Government should raise the source tax to 2.5% and provide subsidy to export earnings brought back home. Even 0.25% increase in export tax would yield good revenue for the government without compromising the competitiveness of the exportable items. Micro entrepreneurs and street vendors fall out of NBR's reach because their businesses do not fall into NBR's VAT category. Meanwhile, extortion from Dhaka streets every year reached Tk 14 billion ,according to an NGO study.NBR could introduce special bonds/tools for them which opens the alley for purchase of bonds worth Tk 100/500 every month/quarter at their own will.Part of the revenue will be used to form crisis fund for them in case of working capital need or bankruptcy. In addition, NBR could introduce special gadgets with satellite data link so that road side kiosk and shops could generate VAT included cash receipts and the info could be sent directly to NBR server. We have a communication satellite and we need to make good use of it. Our software developers could develop software for such device and there is no need for foreign firms. This kind of gadgets without data link already introduced by bus conductors in the name of e-ticketing and squeeze out unreasonable amount from commuters’ pockets. It is interesting to note that those with malevolent intention increasingly hinge on gadgets while govt is shy to introduce them. In local neighborhood shops and groceries, concept of money receipt has become a bygone era thing long ago. To document every transaction this gadget is a must. Now in Bangladesh we see criminalized neighborhoods with the spread of grey areas in business and other sectors. Introduction of VAT gadgets will create VAT culture at the grassroot level business and decriminalize the neighborhoods with greater transparency and documentation. So we have to pay VAT not only to fill govt coffer but to create a safe neighborhood.This is the apt realization and resolution for a chaotic time we have been going through.
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