The one manifesto that's getting overlooked

Mahmudur Rahman   | Published: June 07, 2018 21:45:12 | Updated: June 07, 2018 22:24:43


The concept of election manifestos are the in-thing in modern-day democratic polity. They are being refined so as to reflect international and regional realities with a more than liberal dose of involvement from the international development partners.

Stung into action by loans and grants having been badly misused by corruption or pure inability to utilise, those putting money in are understandably aggrieved. Matters get further complicated when those that are to be the ostensible beneficiaries aren't being listened to.

From Jordan to Greece, people have taken to the streets to protest deep-cutting austerity measures through enactment of new laws that are either not understood or simply leave the voters in direr straits. That political leadership has to be as desperate as to ignore public anger cannot be the objective of a democracy.

Greece's government came to power on an anti-austerity platform. Its actions have been just the opposite. That its hand has been forced is understandable. That there's no way out isn't. That lenders and credit suppliers don't want to accept reality is inexplicable.

But that is precisely what has happened. Should they so choose, creditors are in a position to charge out pieces of Greece and take them over. Modern-day money matters allow for collaterals and mortgages of the kind, and the execution of take-over of assets. In Jordan, the King has had to intervene to stop an uproar over new taxes and austerity measures but that could not save the Prime Minister who had to eventually step down. There are many ways to a goal; the tortuous route means less pain for the populace.

That's where the two-year delay in implementing the new value added tax (VAT) law in Bangladesh is a sign of pragmatic leadership. The development partners have voiced dismay and held back from disbursing $60 million for implementing a law that was crafted over the years.

A similar process was implemented in Laos and includes a six-year phase-in. Political pressure has undone many of the agreed objectives but a consensus, not necessarily driven from understanding, has led to a situation where the Prime Minister was forced to take a call.

The new law has now been delayed for six years and is unlikely before the next fiscal. The country now has a year in which to clear out the mess, reach political and business consensus and accept and communicate that there will be the birthing pains. It's this pain that the electorate may not find palatable.

Instead of different rates of VAT, the taxman prefers simplicity, completely ignoring the implications. A gradual sugar-coated phasing-in alongside with the complex jargon converted to simple, easy to understand terms, has never been attempted.

Yet from population control to micro-finance, the face-to-face communication campaigns have worked much better both, in terms of message delivered and worked on. There's a big comprehension gap between profits and a tax on value-additions. None of these is helped, doesn't help when tax on tax and value addition definitions create further complexity. The outcome has been confusing and unfair discrimination.

And then there are tariff issues. For years companies have tried to explain how tariff values decided by the Tariff 'Commission in cases where there are disputes, aren't fair. It has been a failure of the Commission to be updated, despite the presence of commercial counsellors posted at most of the important trade-hub countries.

Technology with its super connectivity should have made it easier but it has only been recently that the institution has declared an upward revision even though downward revisions have not essentially been taken in to cognisance in the past.

A telling factor, that of multiplied costing increases, creates strain on manufacturers and importers and these have to be absorbed by the consumer.

Perhaps one cruel factor relates to some slip-shod importation rules that allow for packaged products to be imported from India with the retail prices printed on them. That the local cost defies the prevailing currency conversion rates isn't of any concern to anyone save the good-natured grumbling by consumers.

Take another example of sweet corn mixed with spices and butter and sold in super shops with VAT slapped on them. Compare that with the same sweet corn that's sold by roving vendors, not as liberally spiced or buttered without VAT. In both cases there has been value addition.

In the second case, due to cash transaction and no cash registers, VAT is impossible to be deducted or calculated. And when a super shop receipt merely says 'VAT on applicable items' the consumer is none the wiser about how much VAT on products that attract the tax applicable was paid.

The question that follows is, how is the Mushok document submitted to the treasury? Tossing in another spanner in the works, the Maximum Retail Price printed on packaged products includes VAT, so any further addition is a tax on tax. Let's not argue whether the manufacturer-level VAT and retail-level VAT should be the same due to the difference in value addition.

These are just a few examples of the complications that force companies to spend time and resources in courts and tribunals seeking succour. It's also why there are so many revenue-related cases gathering dust in the courts. Processes are required to settle issues but surely, these cannot be at the cost of public inconvenience.

Though not well elaborated or debated in appropriate forums, the new VAT Law risks strong alienation from consumers. Uniform or consolidate VAT rates to reduce collection complexity serve to further make the system unfair. When a scientific system does become so, it loses credibility thereby confidence as well. The United Kingdom, home of modern taxation after the Moghuls, has worked out a VAT system that seems fair enough differentiating between businesses and consumption from VAT on commercial energy and private energy consumption. Between hot foot and cold food the definition of value addition is much clearer.

In Bangladesh, the taxman has palpably failed in spreading the income tax and VAT net. Blaming businesses for non-implementation has some merits but while convoluted quick-fixes may satisfy the ego of a few, it will raise the ire of many.

mahmudrahman@gmail.com

 

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