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The Financial Express

VAT changes 'disaster' for businesses

Analysts tell MCCI-PRI post-budget parley


| Updated: June 27, 2020 16:18:52


VAT changes 'disaster' for businesses

Business leaders alleged on Thursday that the changes in VAT measures in the budget have turned the relevant law into a business-unfriendly statute.

They said the 2012 VAT law has been transformed into the 1991 version after changes in the budget for upcoming fiscal year.

The new VAT law was implemented on July 01, 2019 replacing the previous one.

The views came at a post-budget discussion, jointly organised by the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) and the Policy Research Institute of Bangladesh (PRI).

MCCI president Nihad Kabir moderated the zoom meeting, attended by economists, policymakers and business representatives.

Speaking at the discussion, co-hosted by Resurgent Bangladesh, MCCI tariff and taxation subcommittee chair Adeeb H Khan said the provision for claiming credit of the paid VAT on raw materials has been made on the basis of consumption, which is a "disaster" for businesses.

"The input tax credit will now be based on the portion of input consumed in a tax period for taxable supplies," he said.

The basic principles of new VAT law have been eroded with the input credit restrictions, he argued.

"The provisions of declaring input output coefficient should also be deleted from the VAT law as it is a sort of faulty price declaration method of the previous VAT law," he said.

Input output coefficient is a provision in the VAT law, which the manufacturing units have to submit notifying the tax officials of the quantity of raw materials needed for production.

Private sector adviser to the Prime Minister Salman F Rahman agreed, noting the changes in VAT law went against the basic principle of VAT law and destroyed the entire concept of new law.

He said the chamber bodies should sit together and come up with comprehensive proposals for the changes required in the budget to be passed by June 30.

He also termed increase of advance income tax (AIT) and tax deducted at source a 'regressive measure'.

Mr Adeeb said the base of withholding tax (at source) has been increased in the budget.

He hailed the reduction of corporate tax rates, but termed it 'theoretical' unless the withholding taxes remained unchanged.

Planning minister MA Mannan said the issues relating to tax on internet uses and transformation of VAT law could be addressed in the budget.

Abul Kasem Khan, chairperson of BUILD, underscored the need for devising tax measures to boost employment and enable businesses to reinvest.

Dr Mashiur Rahman, adviser to the PM, said the area of investment of black money could be expanded in the agricultural and infrastructure development.

He said people are allowed to invest undisclosed money without facing question this year, but it should be made clear that what would happen if anybody raised question after that year.

He also said the imposition of tax on gratuity of a retired person in the private sector is "not fair."

Dr MA Razzaque, research director of PRI, gave a detailed presentation on the macro-economic aspects, investment, export, allocation in the budget.

Dr Selim Raihan of SANEM said proper monitoring and management of the government's stimulus fund in Covid-19 pandemic is required.

Syed Almas Kabir of BASIS demanded a review of the upward adjustment of taxes on mobile users, which would push up cost of using Internet.

Rupali Haque Chowdhury, president of the Foreign Investors Chamber of Commerce and Industry or FICCI, sought prospective changes in business planning instead of frequent changes in fiscal measures.

Asif Ibrahim, chairman of the Chittagong Stock Exchange, said the lock-in period for investment of undisclosed money in capital market should be withdrawn to encourage investment. The MCCI president Nihad Kabir suggested quarterly review of the budget as uncertainty looms large during this pandemic.

doulot_akter@yahoo.com

 

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