NBR moves to boost VAT compliance

The revenue authority plans to introduce lotteries and 'honour cards' for consumers and businesses, to boost VAT collection and encourage compliance, said officials of the National Board of Revenue yesterday.

From next fiscal year, consumers will get a chance to try their luck by taking receipts against their purchases from shops. Meanwhile, businesses will get VAT honour cards for submitting the VAT returns required for a year, said a senior official of the VAT Online Project.

Under the lottery system, sales receipts taken by consumers will be treated as lottery tickets. A buyer will be able to take part in the lottery by giving some data -- such as the VAT registration number of the firm, receipt or chalan number, and date of purchase -- through a mobile app or SMS. Prizes for the winners will be lucrative and may typically include the latest gadgets.

“We want to launch the lottery from July the under the new VAT law to encourage consumers to ask for receipts against their purchases,” said Zakir Hossain, deputy project director of VAT Online Project. The lottery is expected to be introduced as part of NBR's plan to implement the VAT and Supplementary Duty Act 2012 through automation of VAT systems and administration. 

The latest law envisages a uniform 15 percent rate of VAT, doing away with the multiple rates that exist under the VAT Act 1991.

Hossain said consumers pay VAT, but they usually do not ask for a receipt. This creates a scope for VAT evasion, he added.

Officials said the lottery involves motivating and rewarding those who are part of the efforts to fight tax evasion. Officials said the lottery system prevails in many countries, such as Malta, the Philippines and Bulgaria, to boost tax compliance.

“The idea of introducing such a lottery is to make the receipt valuable to the consumer. If the receipt serves as a lottery ticket, consumers might have a reason to ask for it,” according to a concept note on VAT lottery.

“Lotteries are designed to increase the issuance of receipts. This way, transactions are more likely to be part of the official economy and VAT can be collected.”

In addition, VAT registered firms will be recognised with 'VAT Honour Cards' for their regular compliance under the new law. If a firm furnishes all the VAT returns for a year, the firm will be given the honour card, said Hossain.

Officials said the recognition will be given to boost submission of VAT returns through compliance. Nearly 30,000 firms submit VAT returns — a number that frustrates policymakers. The NBR aims to ensure 3 lakh VAT returns by 2020.

Businesses will have to use the VAT Honour Cards for various purposes such as participating in tenders, renewing bond licences, getting approvals for bank loans and registering land under the name of the VAT registered entity, according to VAT and Supplementary Duty Rules 2016.

The NBR official said the honour card will be issued automatically for compliant businesses from July 2018.