Barrister Khandoker M. S. Kawsar
In ‘The Rime of the Ancient Mariner’ (1834) by Samuel Taylor Coleridge, the person who shot the Albatross on the sea was punished a lot, and a holy voice said, ‘The man hath penance done’, which means that, he has been punished a lot and now he can be pardoned. But it is said in Bangladesh that, the Tax officials punish one person several times, stating in the same language of the said poem, ‘penance more will do’. Not me, but Mark Twain said once, “The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin”. In my observation, the tax officials sometimes punish major for minor offences or non-compliances.
One of my clients, before I was engaged with this client, paid the whole amount demanded from the relevant VAT authority and also beg apology formally for non-compliance of VAT procedure (not evasion). My client admitted that it was a mistake and should not be considered as evasion. The issue was completely resolved at that time. After three years, a new VAT official was posted in the same Commissionerate and again claimed that, “as you have paid VAT according to the demand three years back, this is apparent that you have evaded and therefore, you are liable to pay again of the same amount”. My client was punished twice for one offence (punishments twice were in three years gap). Punishment was not proportionate to the offence. These kinds of events made me think to write this article.
From 1st July 2019, the new Value Added Tax and Supplementary Duty Act (VAT & SD Act) of 2012 have been activated. The law is a well-drafted law, and if the law is implemented and the VAT Online system is activated properly, it can bring a positive change as well as can reduce corruption in the revenue scenario of Bangladesh. Barrister Jahangir Hossain, former Member (Grade-1), VAT (Policy) of NBR, was the dreamer of these changes. Some features of the Act are pro-business. VAT Registration, monthly return submission are through online, therefore people do not need to face the officials regularly. Now Monthly return submissions through online makes it easier. Now it may not be correct to say, “[on filing for tax returns] This is too difficult for a mathematician. It takes a philosopher” (Albert Einstein) or “Income tax returns are the most imaginative fiction being written today” (Herman Wouk). Further, an increase in the mandatory registration threshold from 80 lac to 3 crores is a happy moment for many businesses. For this change, now the businesses of Bangladesh will not be able to tell in the same language of Will Rogers, “The difference between death and taxes is death does not get worse every time Congress meets”, nor be able to utter the Jewish Proverb, “Taxes grow without rain”. Further, Businesses are free from price declaration, therefore free from hassle relating to the process of price declaration. Businesses are not in compliance with maintaining account current and tax in advance. Now Transfer of stock from one unit to other is VAT-free, previously which used to make huge opportunities to harass the businesses and their vehicles. Now the transfer of goods or services from one branch to another separately registered branch of the same economic activity will not be treated as supplies, therefore not VATable. There is a mandatory provision for the disposition of the appeal. Now New VAT and SD Act prohibit the Commissioner from sending the case on remand for reconsideration, saving time and cost of adjudication. Amendment opportunity to submitted VAT returns is a remarkable development.
Some changes made by the new Act are of demerits. Determination of Fair Market Value instead of price Declaration and taking of rebate are the issues which will make complexities. Tax refund to foreign tourists, is a good addition, whereas VAT on E-commerce, on the capital of SEC listed Companies (especially for multinationals) are bad additions. Some changes to the new Act are very technical. The multiplicity of VAT rates is a big loophole of the new Act. 5%, 7.5%, 10% and 15% slabs will make complexities in VAT administration. The businesses will try to prove them under one slab, whereas the VAT officials will try to prove them under another slab, making a huge anomaly. The businesses on the one hand, and the officials on the other hand will try to use these obscurities as opportunities. There could be a provision of punishment for the VAT officials who harass businesses unreasonably.
Determination and clarifications about offences and their punishments in relation to revenue matters, is a very vital issue. For wrong determination of offences and non-compliances and the relevant punishments, are the main causes of the backlog of millions of revenue cases, including more than 22 thousand cases pending in the Supreme Court of Bangladesh (The Daily Bangladesh Protidin, dated 4th July 2019). Being a VAT & Customs practitioner and consultant, I have made submissions to different courts and tribunals as well as had discussions in several talk shows that, in the laws of VAT & Customs, offences and their punishments should be defined clearly. I made the submissions in different occasions that, ‘Offences’ and ‘non-compliance or irregularities’ should be defined with clarity. The term ‘Evasion’ should be defined and considered as ‘offence’. Mere ‘non-compliance or irregularities’ should not be considered as ‘evasion’, therefore not punishable like offence. Mere ‘irregularities’ may be mere non-compliance of procedures, or mistakes, or negligence, or ignorance. Whereas to be an evasion or offence, there should have the intention (aim or objective) to conduct the offence and the intention will be successful or acted upon ultimately. There should have a causal link between the offence and its intention. Sometimes non-compliance in relation to VAT documents maintenance or mere mistakes relating to bond (customs) matters should not be considered as evasion or offence. Therefore, imposition of the levy at a high rate as well as a penalty in mere non-compliance would do injustices, consequently huge litigation and struck-up of huge government revenue, huge harassment to businesses, huge opportunity to unfair officials. Obscurity in defining the terms of ‘offence’ and ‘irregularity’, are giving chances to offenders who are misusing the bond or other facilities to make money laundering of millions of dollars. Section 85 of VAT & SD Act 2012 has more clarified the ‘non-compliance’ or ‘irregularity’ than Section 37 of VAT Act1991. Same way, punishment under section 156 of the Customs Act should be clarified more.
Therefore, it is recommended that the terms’ offences’, ‘Punishments’, ‘Irregularities’, ‘non-compliance’ should be more clarified through SROs. More recommendations are, at least five benches should be formed in the High Court for hearing of the cases in revenue issues. Also it can be recommended that ADR should be activated properly and sending in the ADR by the adjudicators (Officials) should be made mandatory. These should be done quickly as, “There is no such thing as a good tax” (Winston Churchill).
The writer is the only Bangladeshi Regional Representative (North Asia) of ICC YAF and a Financial Crime Specialist. He can be reached at firstname.lastname@example.org.