Withdraw or lower VAT on utility services

Economists urge National Board of Revenue

Economists yesterday suggested to the National Board of Revenue for either withdrawing or lowering the value-added tax (VAT) on electricity, gas and other fuels considering the impact of VAT on prices of the essential products. 

At a pre-budget discussion with the revenue board, they said that there should be no VAT on the products in the logical sense of VAT system.
According to the new VAT and Supplementary Duty Act-2012 which is scheduled to come into force from July 1, consumers will have to pay VAT at the rate of 15 per cent on gas and electricity bills. Currently, consumers pay 5 per cent VAT on the bills.
‘Electricity, gas and fuels are universal elements and logically there should be no VAT on the products as getting credit on paid VAT is difficult for the sector,’ said Economic Research Group chairman Wahiduddin Mahmud. 
Imposing VAT on the products is a discrepancy of the law and the NBR should admit the reality as it has imposed the VAT on the products to meet the country’s financial needs, he said. 
‘So, it will be better if the VAT can be withdrawn for the sectors,’ he said, adding that if it is not possible to withdraw the VAT, the NBR should consider to keep the rate as less as possible. Mahmud, also a former adviser to the caretaker government, said that the NBR should not waive the tax on investment of undisclosed money in purchasing apartments and plots. 
If the revenue board considers allowing investment of undisclosed money in housing sector, the scope should be given with condition of paying regular income tax, he said. 
It can be considered as opportunity of delayed disclosure of undisclosed income, he said. 
The revenue board has nothing to do whether the money is legally or illegally earned, the Anti-Corruption Commission will see the issue, he added. 
He also suggested the NBR for adopting measures like disclosing the name of tax and VAT defaulters at open space like market, if legally possible, to bound the people to pay tax and VAT. 
The NBR may also certify the compliant taxpayers in the same manner, he said. 
People will pay tax and VAT fearing shame in personal and social domains as tax defaulters, he said, adding that defaulters will feel guilty if their tax payment status becomes public. 
He also advised the NBR for crosschecking the transaction statements of the businesses provided to tax authority and banks for tax and loan purpose respectively.  
Many businesses show less income in the statements given to the NBR to pay less tax while show exaggerate income in the statements given to banks for getting loans, he added. 
He also emphasised on re-fixing the minimum registration value of land in the country as a large portion of income from transfer of land remain out of tax net due to existing lower minimum value as in reality the land is transferred much higher price. 
Centre for Policy Dialogue research fellow Towfiqul Islam Khan requested the revenue board to consider lowering the VAT rate for gas and electricity. 
The prices of gas and electricity have been increasing. An increase in VAT will increase the cost of consumers, he said. 
If necessary, the NBR may gradually increase the VAT rate to 15 per cent for the products with prior declaration which will bring comfort to consumers and investors, he added. 
He also advocated for introducing inherent tax on assets. 
NBR chairman Md Nojibur Rahman said that there should be no doubt about the implementation of the new VAT law from July 1 as the NBR completed its preparation in this regard. 
NBR will also arrange a debate competition between VAT officials and businessmen over new VAT law, he said. 
NBR member (VAT Policy) Jahangir Hossain, Bangladesh Institute of Development Studies senior research fellow Anwara Begum, PricewaterhouseCoopers (PwC) partner in-charge in Bangladesh Mamun Rashid, experts Susmita Basu, Pulok Shaha and Prasun Kumar Maiti, among others, spoke at the meeting. 

Withdraw or lower VAT on utility services

Economists urge National Board of Revenue

Economists yesterday suggested to the National Board of Revenue for either withdrawing or lowering the value-added tax (VAT) on electricity, gas and other fuels considering the impact of VAT on prices of the essential products. At a pre-budget discussion with the revenue board, they said that there should be no VAT on the products in the logical sense of VAT system. According to the new VAT and Supplementary Duty Act-2012 which is scheduled to come into force from July 1, consumers will have to pay VAT at the rate of 15 per cent on gas and electricity bills. Currently, consumers pay 5 per cent VAT on the bills. Electricity, gas and fuels are universal elements and logically there should be no VAT on the products as getting credit on paid VAT is difficult for the sector, said Economic Research Group chairman Wahiduddin Mahmud. Imposing VAT on the products is a discrepancy of the law and the NBR should admit the reality as it has imposed the VAT on the products to meet the countrys financial needs, he said. So, it will be better if the VAT can be withdrawn for the sectors, he said, adding that if it is not possible to withdraw the VAT, the NBR should consider to keep the rate as less as possible. Mahmud, also a former adviser to the caretaker government, said that the NBR should not waive the tax on investment of undisclosed money in purchasing apartments and plots. If the revenue board considers allowing investment of undisclosed money in housing sector, the scope should be given with condition of paying regular income tax, he said. It can be considered as opportunity of delayed disclosure of undisclosed income, he said. The revenue board has nothing to do whether the money is legally or illegally earned, the Anti-Corruption Commission will see the issue, he added. He also suggested the NBR for adopting measures like disclosing the name of tax and VAT defaulters at open space like market, if legally possible, to bound the people to pay tax and VAT. The NBR may also certify the compliant taxpayers in the same manner, he said. People will pay tax and VAT fearing shame in personal and social domains as tax defaulters, he said, adding that defaulters will feel guilty if their tax payment status becomes public. He also advised the NBR for crosschecking the transaction statements of the businesses provided to tax authority and banks for tax and loan purpose respectively. Many businesses show less income in the statements given to the NBR to pay less tax while show exaggerate income in the statements given to banks for getting loans, he added. He also emphasised on re-fixing the minimum registration value of land in the country as a large portion of income from transfer of land remain out of tax net due to existing lower minimum value as in reality the land is transferred much higher price. Centre for Policy Dialogue research fellow Towfiqul Islam Khan requested the revenue board to consider lowering the VAT rate for gas and electricity. The prices of gas and electricity have been increasing. An increase in VAT will increase the cost of consumers, he said. If necessary, the NBR may gradually increase the VAT rate to 15 per cent for the products with prior declaration which will bring comfort to consumers and investors, he added. He also advocated for introducing inherent tax on assets. NBR chairman Md Nojibur Rahman said that there should be no doubt about the implementation of the new VAT law from July 1 as the NBR completed its preparation in this regard. NBR will also arrange a debate competition between VAT officials and businessmen over new VAT law, he said. NBR member (VAT Policy) Jahangir Hossain, Bangladesh Institute of Development Studies senior research fellow Anwara Begum, PricewaterhouseCoopers (PwC) partner in-charge in Bangladesh Mamun Rashid, experts Susmita Basu, Pulok Shaha and Prasun Kumar Maiti, among others, spoke at the meeting.