Badrul Ahsan :
Faced with strong opposition from the mass people and businesses, the government is now set to find alternatives to the implementation of the new VAT Act in its existing form, a Finance Ministry high-up said.
Prior to any alternative, its implementation might be postponed, the official hinted.
The government is weighing up impacts of the new VAT rate on public life, especially on those in limited-income bracket, and its repercussions ahead of the next general election.
A recent meeting where high-ups from the National Board of Revenue (NBR) and the Finance Division were present analysed the repercussion of the new VAT Law before the 2019 election.
A uniform 15 per cent VAT rate is supposed to be
introduced as per the VAT Act 2012, which many believe will raise the cost of living.
People familiar with the developments told the New Nation that the last cabinet meeting, chaired by Prime Minister Sheikh Hasina, reached a consensus on the imperative of postponing implementation of the VAT law from July 1.
However, no new timeline for enforcement of the new VAT Act has been set.
Executive Director of the Policy Research Institute of Bangladesh Dr Ahsan H Mansur, who was involved with the framing of the new VAT Act, said he also heard about government’s unwillingness to go for implementing it this year. “This is one of the major reform programmes this government has taken up. Dropping the new VAT act won’t be a wise move,” he told the New Nation.
Dr Mansur thinks the businesses will also be loser as the new VAT system is much progressive.
The economist said the revenue collection would also be impacted as it is believed to be the biggest source of revenue.
Contacted over telephone, Shafiul Islam Mohiuddin, President of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), told The New Nation that he was aware of the developments on the new law.
“I am not sure if the entire act will be dropped this year. But, it will definitely be revised,” said the chief of the apex trade body.
Mohiuddin said he had a meeting with Prime Minister Sheikh Hasina on this issue. “She does not want the essential prices go up and common people suffer.”
Contacted, NBR Chairman Nojibur Rahman said no decision was taken about execution of the VAT Act this year.
“The issue is openly being discussed in Parliament. We are working on it,” he said.
Another NBR high official said non-implementation of the new VAT act will impact budget financing and it may raise the deficit, which is now estimated at 5.05 per cent of the gross domestic product (GDP).
The NBR has targeted mobilization of Tk 912.54 billion, up by Tk 225.79 billion from revised budget estimation, from VAT next year, according to budget documents.
Following suggestion from the International Monetary Fund (IMF), the government framed the new VAT Law. The introduction of 15 per cent VAT was one of the conditions of the IMF for extending US$1 billion worth of Extended Credit Facility (ECF) to Bangladesh in 2010.
The IMF in its Article IV Consultation Mission report, published after the proposed budget, welcomed Bangladeshi authorities’ commitment to launching the modern VAT Act from July next.
The planned launch of the modern value-added tax in July 2017 and improvements in tax administration are expected to give boost to tax revenues, providing space for increased public investment and social spending.
Faced with strong opposition from the mass people and businesses, the government is now set to find alternatives to the implementation of the new VAT Act in its existing form, a Finance Ministry high-up said.
Prior to any alternative, its implementation might be postponed, the official hinted.
The government is weighing up impacts of the new VAT rate on public life, especially on those in limited-income bracket, and its repercussions ahead of the next general election.
A recent meeting where high-ups from the National Board of Revenue (NBR) and the Finance Division were present analysed the repercussion of the new VAT Law before the 2019 election.
A uniform 15 per cent VAT rate is supposed to be
introduced as per the VAT Act 2012, which many believe will raise the cost of living.
People familiar with the developments told the New Nation that the last cabinet meeting, chaired by Prime Minister Sheikh Hasina, reached a consensus on the imperative of postponing implementation of the VAT law from July 1.
However, no new timeline for enforcement of the new VAT Act has been set.
Executive Director of the Policy Research Institute of Bangladesh Dr Ahsan H Mansur, who was involved with the framing of the new VAT Act, said he also heard about government’s unwillingness to go for implementing it this year. “This is one of the major reform programmes this government has taken up. Dropping the new VAT act won’t be a wise move,” he told the New Nation.
Dr Mansur thinks the businesses will also be loser as the new VAT system is much progressive.
The economist said the revenue collection would also be impacted as it is believed to be the biggest source of revenue.
Contacted over telephone, Shafiul Islam Mohiuddin, President of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), told The New Nation that he was aware of the developments on the new law.
“I am not sure if the entire act will be dropped this year. But, it will definitely be revised,” said the chief of the apex trade body.
Mohiuddin said he had a meeting with Prime Minister Sheikh Hasina on this issue. “She does not want the essential prices go up and common people suffer.”
Contacted, NBR Chairman Nojibur Rahman said no decision was taken about execution of the VAT Act this year.
“The issue is openly being discussed in Parliament. We are working on it,” he said.
Another NBR high official said non-implementation of the new VAT act will impact budget financing and it may raise the deficit, which is now estimated at 5.05 per cent of the gross domestic product (GDP).
The NBR has targeted mobilization of Tk 912.54 billion, up by Tk 225.79 billion from revised budget estimation, from VAT next year, according to budget documents.
Following suggestion from the International Monetary Fund (IMF), the government framed the new VAT Law. The introduction of 15 per cent VAT was one of the conditions of the IMF for extending US$1 billion worth of Extended Credit Facility (ECF) to Bangladesh in 2010.
The IMF in its Article IV Consultation Mission report, published after the proposed budget, welcomed Bangladeshi authorities’ commitment to launching the modern VAT Act from July next.
The planned launch of the modern value-added tax in July 2017 and improvements in tax administration are expected to give boost to tax revenues, providing space for increased public investment and social spending.
