The move will establish transparency in indirect tax collection

People shop at a clothing store in Dhaka. The implementation of an automated chalan in VAT collection will save time and reduce the scope of human errors. Photo: Star/file

A panel of the NBR has suggested the introduction of an e-invoicing system to collect value-added tax (VAT) to establish transparency in the collection of the indirect tax, the biggest source of revenue for the state.

"The introduction of digital invoices will help the revenue authority and businesses go paperless," said the panel in a report submitted to the chairman of the National Board of Revenue (NBR) last week.

"This will enable the establishment of an integrated and transparent platform," it said.

The implementation of an automated chalan will save time and reduce the scope of human errors. It will also curb fraud in VAT collection and misreporting, the report stated.

The revenue administration, which collects 86 percent of total revenue, formed the 13-member committee at the end of October last year.

It was aimed at strengthening the automation process of the NBR and formulate integrated plans for customs and VAT, which together account for nearly 70 percent of total taxes.

The committee noted that the three wings of the NBR—income tax, VAT, and customs—have separate automated systems. However, the data centres for these systems are set up in different locations.

In the absence of interconnectivity among these systems, complexities arise in the exchange of information, the report stated, urging the establishment of a central data centre.

The NBR panel also suggested the creation of a data warehouse so that all its departments and offices can access information, analyse data, and prepare reports through data mining.

In its submission, the panel recommended integrating all existing online platforms designed to facilitate business and boost the collection of VAT, customs, and income tax to develop a modern and sustainable revenue infrastructure.

To facilitate imports and exports, the committee urged the NBR to introduce an "on-chassis delivery tracking system", which would significantly reduce risks.

In this regard, the panel cited an "Authorised Economic Operator" (AEO) system launched by the NBR to promote faster trade. Already, 15 firms are operating as AEOs, and a number of applications are under process.

The NBR team stated that steps should be taken to implement the AEO module for the smooth execution of the system.

The panel also suggested the introduction of an electronic cargo tracking system, container movement tracking, electronic document transfer, and an electronic data exchange system following World Customs Organization guidelines.

"A national risk-targeting centre can be set up at the Customs Risk Management Commissionerate to identify national and trade-related risks," the report recommended.

The committee, headed by Mohammad Faizur Rahman, commissioner of Customs, Excise, and VAT Commissionerate, Dhaka (South), highlighted the rising incidence of financial crimes facilitated by the expansion of ICT.

The expansion of ICT has also led to changes in the nature of financial crimes globally.

The panel noted that illegal activities such as the release of goods through customs to evade taxes, the import of illegal items, and trade-based money laundering are rising due to the use of mobile devices, apps, hacking, and surveillance devices.

"There is no alternative to establishing a digital forensic lab and creating skilled manpower," it said.