Automated VAT admin still dependent on foreign operators

Bangladesh's fledging automated VAT administration remains dependent on foreign operators and risks disruption countrywide if the hired firm leaves, sources said amid concern over a long payment backlog.

They feel the National Board of Revenue (NBR) is unlikely to be able to switch its dependency on foreign contractors for ICT support to keep countrywide VAT online system operational, for a lack of rearing its own techno-savvy manpower.

The existing ICT team of the NBR is ill-equipped with manpower and logistics to take over the updated technology of IVAS system from the foreign contractor, officials said.

Vietnamese company FPT has developed the Integrated VAT Administration Software (IVAS) system to automate the nationwide network under a Tk 6.90-billion project.

Officials fear in case the FPT suspends services, the IVAS system would go shut disrupting the administration of the value-added tax across the country.

Tenure of the project expired on June 30, 2021 but NBR's ICT team could take over only 20 per cent of the system operation from the hired company.

Kazi Mustafizur Rahman, Commissioner of Customs Risk Management Unit, who supervises the VAT online system, said the existing ICT team has no strength to support the high-tech system.

Currently, the ICT personnel of NBR do not know the high-tech terminologies under which the VAT online system has been developed.

"We can impart training if adequate number of ICT officials is recruited for the purpose," he added.

Alternatively, he suggests, the revenue board can outsource the task if expertise is found locally.

Officials said bills of the Vietnamese contractor remained pending for last one and a half years, stoking the risk of disruption.

Earlier, the company, in a letter to NBR, had warned of discontinuing its support to the IVAS from January 1, 2023 unless the arrears were paid urgently.

A senior NBR official said the payment issue remained under scrutiny of Internal Resources Division (IRD) although the Ministry of Finance (MoF) approved the funds.

Meanwhile, the VAT wing of the board formed a body to impart training to the officials on the automated-system operation in preparation for the makeover.

VAT collection and other administrative works are linked with the IVAS backbone.

The NBR official said the board asked the FPT to gradually handover the system to the ICT officials and involve them with the process of automation for the final adaptation.

Recently, the revenue board formed three dedicated teams to operate the integrated VAT administration system or IVAS unit in a bid to make the digitized VAT system sustainable.

An eleven-member system-operation team would monitor, upgrade, develop the iVAS and add new features to the system.

It would establish Application Programming Interface to enrich data, develop purchase-and-sale register and e-invoicing system, validate or auto-capture treasury chalan, coordinate core business team and technical team.

A twenty-member Core Business Team would take initiative to make iVAS module useable to all field offices and monitor it.

The team members will identify the areas to make iVAS system user-friendly, motivate taxpayers to use iVAS, resolve problems with using the system, amend law and rule in consistency with iVAS, contact vendors to develop system according to business process etc.

Nine-member technical team would look after data security in the iVAS system, maintenance, system security, troubleshooting. It will also prepare expenditure estimation of hardware and software as per recommendation of the system-operation team, take initiative to upgrade software, incorporate budgetary changes in system and so.

Revenue-mobilization activity like all types of VAT registration, enlistment, submission of returns, processing refund application, payment of VAT, accounting system, auditing, disposal of cases, arrears realization, providing information and document to the taxpayers would be monitored under the digital system with the supervision of the team.

Talking to the FE, a senior VAT official said the NBR would have to develop its own expertise to operate and monitor the iVAS system in collection of the all-encompassing tax.

"Dependence on the FPT would make NBR handicapped and it would be bound to pay the company until it takes over the system," he added.

Service charges worth Tk 132.85 million of the company remained stuck during the last one and a half years due to what is termed inaction of the National Board of Revenue.

The letter to the NBR was sent by Chu Khanh Hoa, project director of the VAT Online Project and Deputy Director of Central Government Sector of the FPT Information System Corporation. On December 22, 2022, the company sent its fourth notification in 30 days regarding payment of its dues, urging the NBR to consider the issue with 'highest priority'.

"…….we would like to give the notice that, if within December 2022, FPT does not receive these payments, then we could not give commitment for prompt support on maintenance and operational services, due to company's internal reallocation and prioritization," the letter reads.

The company representative said it had also received notices from its subcontractors regarding network infrastructures for delay in payment.

The entire VAT online network would be unstable and connections would be interrupted if those subcontractors use their resources in other works being disappointed by delay in payment, he added.

"This might hamper the public image of VAT online system in different aspects due to these unexpected delays," he said.

The FPT management also reminded that delay in delivery for audit and risk outputs from the NBR also leads to getting stuck the payment for FPT with 20 per cent of the main contract worth Tk 1,725,000 and US$ 3,826,774.80.

"All of these late payments are subject to applying interest with 1.0 if the payment could not be made 45 days after the submission of invoice from FPT," he said.

VAT online project officials said the company has several subcontractors for different scopes of work.

"Now the situation is crucial because we are receiving huge pressure from our headquarters and we could not make any further payment to our subcontractors without receiving pending bills from NBR," the company man said.

The government owes payments under the original post- warranty contract worth Tk 67.81 million and payment under extended duration worth Tk 65.04 million.

FPT has been providing post-warrantee service since July 1, 2021 that would end in March 31, 2023.

It is not receiving any payment from the government during the last 18 months under the post-warrantee services worth US$ 1,241,320.57 and Tk 132.85 million.

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