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Why Value Added Tax (VAT)?
 Muzaffar Hameed May 31, 2010, 01:34:26 AM 

 

Why! Value Added Tax (VAT)?

 

This report has been prepared by the standing Committee of Sheikhupura Chamber of Commerce & Industry along with the Coordination of all Chambers and Associations in Pakistan. We welcome your participation in form of for discussion and debate.
“To be or not to be, that is the question”, a famous quotation from Shakespeare’s drama and yet very much alive even today as there is a great hassle and chaos spread in the country regarding the new tax system named as Value Added Tax (VAT) that either it should be imposed or not. It has become the nature of our people that they always think as a mob instead of thinking as a nation. Secondly, we believe in the rumors circulating in the society due to the pessimist approach. Due to such attitude, many projects of national importance have faced a bad failure and many are also at stake (like VAT) such as Kala Bagh Dam.
 
Now we have come to an edge where we have to take a single decision regarding VAT that either we are against it or we favor it.  As far as the Sheikhupura Chamber of Commerce & Industry SCCI is concerned the answer is
 
“YES”
 
This “Yes “seems to be quite strange because when the whole country stands against decision, a single chamber dares to advocate it alone, but the reason behind this sort of valor is the dedication towards nation building along with a keen sense of citizenship. Keeping the national interests in view, SCCI has taken a bold step to raise its voice for the favor of VAT despite the unpleasant response from its friends and foes.
 
Value Added Tax or VAT is unfamiliar for the most of the ranks and files and this thing gives vent to the rumors to spread among the nation. There is a misunderstanding about VAT that it is taken as a “Tax on Tax”. This delusion is mere ignorance and lack of understanding. It’s a new improved version of previous sales tax system.  VAT is a system based on proper filing and documentation on daily basis. It can be further described that usually the daily transactions by the business community are made and kept without any formal documentation and sometimes they are documented with the gap of many days. Secondly the invoices are not issued properly. VAT is the solution of all these confusions and it is an opportunity to revive the old manual systems of transactions and tax recovery along with its drawbacks and negative aspects
 
ADVANTAGES of VAT
 
VAT is a system to check the corruption of the previous system and to free the nation from the shackles of black marketing. Normally, the buyers purchase the ingredients from the exporters without verifying the documentation of the demanded articles. This approach makes it way towards smuggling and distribution of substandard material in the market as if the document of the product are neither demanded nor verified by the buyer, there is a chance that the harmful expired material shall be delivered, outdated enough to become injurious to health.
VAT system is also helpful to define the quality standards of the products. If some article is properly documented about and examined thoroughly, it will become very easy to sort out its ingredients, their mutual ratio, time of expiry and its efficiency. Normally the products which are made in Pakistan are mostly made up of the material which is purchased without any documentation to save the tax. As a result the validity of technical life of the raw material is not examined properly because of unavailability of detailed information. This satanic approach is causing many health problems. There is a possible way to avoid such mishaps in the future by adopting the VAT system. If this target is achieved, our country will become again hospitable for the both foreign and domestic investors who are shy to pour their capital in the various flanks of the industry but hesitate due to illegitimate transactional processing. These investments will become beneficent for the better business growth.
 
IF VAT IS NOT IMPLEMENTED!
 
The basic hurdles in the implementation of VAT are the anti social elements and the smuggling mafia who are jointly reacting against VAT. If it is not implemented, Pakistan shall become a breeding place of black marketers and smugglers who will earn a bad name to the Pakistani economy and will make this holy land black listed by the first world countries for the investment. But if the VAT is imposed by law it will become compulsory for every one to be responsible for his transactions and it will also be help full to receive full tax payment from the tax shirkers, which will be spent in progressive dimensions.
 
 
SUGGESTIONS for THE SMOOTH IMPLEMENTATION OF VAT
  • To promote VAT, the conditions and restrictions must be softened. The adopters of VAT must not be threatened by the penalizing or arrest. Other than this financial penalties must be suggested for the VAT system violators to make this system compatible for the business community.
     
  • VAT is an Internet based system and the internet facilities are scarcely available throughout the country, so the availability of internet or DSL must be ensured every where so that every business man may enjoy the VAT facility at his door step and till that time, the concerned entities with the limited internet access must be subsidized.
  •  Currently, as the internet connections are not very frequent, the regional chambers of commerce must be equipped with the computer labs to facilitate the local business community in order to make their transactions possible to be uploaded on the internet through VAT system.
  • The computer basic education must be made compulsory and it must be checked that the computer labs facility is available at every school to educate the new generation in a modern way and to make them familiar with the latest technologies. This will make them enable to meet the challenges of the coming future.

 

 

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