Remove tax-VAT inconsistencies to help businesses remain competitive15 June 2021
tax and VAT has made the country's businessmen nervous, although
several steps have been proposed to protect domestic industries. Amid
the pandemic, like in other countries, small and medium enterprises are
under trouble and recession and require more policy support. Many
enterprises have lost their capital, skilled workforce and the hope to
regain competitiveness. Against this backdrop, the sector leaders have
demanded monetary and policy support in the proposed budget.
Among the inconsistencies, the National Board of Revenue (NBR) collects Advance Tax and VAT, which are supposed to be returned to the concerned stakeholders after a certain period of time. But the traders are not getting back the money in time. As a result, a big amount of capital money has remained blocked on NBR accounts for a long time. Although the big traders are capable of adjusting the outstanding amount, the entrepreneurs of SMEs are becoming losers.
Besides, uneven price competition due to the existing VAT law in the local market has plagued businesses. The NBR has installed Electronic Fiscal Device (EFD) machines at some business entities across the country, while most of the business entities do not use the machines. The users of the EFDs are facing an uneven price competition and are losing customers by charging high prices.
Experts have said the government should ensure integrated facilities for all sectors by eliminating existing VAT and tax discrimination in the goods and services sectors. Three per cent Advance Income Tax collection should be continued for commercial imports by cancelling a maximum 20 per cent AIT imposed on VAT registered industries. As the tax at source is several times higher than the tax on payable profits, the businesses are sinking into the quicksand of secret transactions.
There are lots of problems in the VAT law. The businesses have demanded the formation of a high-powered taskforce immediately to remove the anomalies and inequalities. While inconsistent tax and VAT put obstacles to business that ultimately lead to loss of competitiveness of local business and the local market is grabbed by imported products. To help overcome the fear, the government should back the local businesses with policy and monetary support.