VAT law must listen to what business leaders say

THE implementation of new Value Added Tax (VAT) law stipulating 15 percent VAT rate at all levels, omitting package VAT facility from July 1, are threatening business growth. Business leaders are totally opposed to such move and demanding it must stop. As per a national daily, businesspeople are rallying against the new law and taxmen are uncertain about the success of the law’s implementation. And, while the overall business climate is unsatisfactory, foreign investors are thinking twice about investment, FDI and Remittance inflows are shrinking, the banking sector is suffocated due to several loan scams and high-tech heisting, the capital markets are in a bad shape, the imposition of the new tax will suffocate doing business here and mount pressure on consumers.
The Finance Minister and high-ups of the National Board of Revenue (NBR) are persistently expressing their firm determination to implement the law from the stipulated time, but the ground reality is that full implementation may not be possible. Field officers of NBR suggest implementation of the law step by step as both sides — the VAT officials and businesses — need more training and logistic support. Meanwhile, business leaders have opposed the 15 percent flat VAT rate for all sectors and demanded implementation of NBR-FBCCI committee recommendations —- increasing VAT-free turnover ceiling to Tk 36 lakh, setting turnover VAT at 3 percent for turnover up to Tk 1.5 crore, setting VAT at 4 percent for traders who are unable to get rebates and at 2 percent for traders who sell products at fixed prices.
The VAT at different stages of the manufacturing and service will ultimately put the burden on consumers–the ordinary people. The new law will bring the exempted 1973 new products under the VAT that will put the homemade production, small and medium enterprise in danger. A vernacular daily also stated that the NBR analysis expressed doubt over the ability of most industries to impose 15 VAT as our socio-economic condition is not suitable for paying such high rate VAT. Large conglomerates, including Unilever, said that they need at least two months to change their existing business procedures and accommodate the online system. So, the preparedness of the small business enterprises could be guessed easily.
The NBR is yet to issue the new VAT rules, which will be the main instruments in implementing the new law, though only one and a half months are left for traders to prepare themselves to be in line with the new rules. The VAT will ultimately be a burden on and be paid by ordinary people that will increase the inflation rate severely. When ADP implementation is low and corruption rate is high, the government can surely exempt people from the burden of paying such high rate VAT. When the existing resources are not being properly utilized, why would this even be necessary.