Media reports on Sunday said despite repeated requests from businesses, the government still sticks to a single flat rate in the new VAT law as against demand by business for multiple VAT rates. The National Board of Revenue (NBR) claims multiple rates are problematic and will deprive the government of real benefits from the new VAT system. It will have many leakages but in our view taxpayers’ difficulties must not also lose sight.
Finance Minister’s AMA Muhith’s indication that VAT rate may be reduced is not enough, business expects that he should make it clear whether a 12 percent target is now on table instead of the proposed 15 percent while giving exception to several goods and services used by common people. The new VAT law is only several weeks away from being implemented from July 1. Here NBR’s hints that it will not cause inflation because it will keep major essentials out of higher VAT rates is quite sensible step. It says basic food, life-saving drugs, public transport, agriculture goods and education will remain basically unaffected. But whether people will really remain unaffected from price hike of these essentials will largely depend on whether the government will be able to rein in the dishonest people when it has no control over the market.
Business community believes that the government must make clear mow the real VAT rate coming into force to help them sort out new business and plan how to run existing ones. Here the NBR move to impose flat rate remains the most critical factor as businesses are strongly opposed to it on the ground that differential rates are essential based on small, medium and big size businesses.
We suggest that the government should clear the new VAT rates immediately and pay heed to their demand that there must be some variability in VAT rate instead of flat rate. It makes sense. All businesses irrespective of their size can’t be treated on equal footing because of variation in their capacity to pay. NBR mainly favours uniform rate because they fear providing rebate at multiple rates will be difficult to manage. But in our view legitimate concern of the tax-payers must also be heard. The government must review the issue to the comfort of the business community when it has still time in hands.
