A 15% uniform value added tax (VAT) for all businesses will be a tool for harassment, especially for small and medium enterprises, business leaders have claimed. Experts are saying the new VAT law will be very tough to implement because businesses and the system are not ready yet. Small businesses do not have the capacity to maintain accounts at several levels of purchase, Md Shafiul Islam, first vice president of the Federation of Bangladesh Chamber of Commerce and Industries (FBCCI) told the Dhaka Tribune. As a result they will fail to show the documents needed to enjoy the intended rebates, he argued. “It will only be a tool for the concerned authorities for the harassment of businesses,” he said. “It will create anger among the people and will keep them from participating in the VAT process,” Shafiul added. He urged the government to introduce package VAT for small businesses as they contribute a lots to the national economy and generate employment especially for rural people. The business leader urged the government to introduce multiple rates of VAT in the next budget. “I think a 15% VAT is too high and it should be 10%,” economist AB Mirza Azizul Islam told the Dhaka Tribune. The former finance adviser to caretaker government admitted that a unified VAT rate was ultimately needed but businesses, especially small entrepreneurs, were not ready and capable of maintaining accounts. “If it is made mandatory it will be very tough to implement,” he said. If the uniform rate is reduced to 10%, it will help increase willing participation of the people as well as collection, he added. However, Islam opposed the ceiling, saying it would create an opportunity to manipulate and to evade VAT. “But there should be an exemption limit for small businesses,” he added. “It is quite impossible for small entrepreneurs to maintain accounts because it costs a lot to employ accountants. If the new VAT law is implemented with a 15% unified rate, it will not increase government revenue. It will increase harassment for businesses instead,” Abdus Salam, president of the Baboshayee Oikko Forum (Business Unity Forum) told the Dhaka Tribune. He argued that businesses would have to pay bribes instead of VAT as officials will take advantage of them for lacking proper documents. Baboshayee Oikko Forum is a platform of various business associations formed to put pressure on the government to materialise several demands including package VAT. “If the government wants to see the development of an SME sector, it will have to keep package VAT in the law for the sector. Otherwise, small manufacturers will lose confidence due to production cost,” Monjur Ahmed, a VAT expert and FBCCI adviser, told the Dhaka Tribune. This will cause mport dependency to rise and create a crisis of employment, he said. He also sought a permanent solution to the VAT rate issue. The Parliament in 2012 passed the law to automate the VAT administration and increase revenue collection. The act will come into effect from July 1, 2016 after unveiling it in the parliament during the announcement of the budget for the fiscal year 2016-17 on June 2. Following the initiative, the National Board of Revenue in 2013 undertook the VAT Online Project to ensure a taxpayers-friendly and service-oriented automated system. But the law has already drawn widespread criticism from different quarters, mostly from leading business associations, as it will impose a uniform 15% VAT on all products and services, removing existing multiple rates. The law will have no provisions for package VAT or the truncated value-based VAT system. With the introduction of the law, all levels of business will have to pay a unique and single VAT rate at 15%.
