BUSINESSES are on board with the government’s plan to introduce four different rates of value-added tax (VAT) from July for the implementation of the much-talked VAT Law 2012. As per the scheme, there will be four different rates of VAT applied on most of the goods and services under the existing VAT Law 1991 ranging 5 to 15 per cent. In the face of protest from the businesspeople, the government retreated to implement the laws.
Currently, some people are paying too much tax while others are paying nothing. In this context, Finance Minister said the government wishes to bring everyone under the tax net. Therefore, there would be multiple VAT rates: 5.0 per cent, 7.5 per cent, and 10 per cent varying from item to item, different than the flat VAT rate theory of the 2012 law. The introduction of multiple rates would require amendment of the VAT and Supplementary Duty Act 2012 as it envisaged a uniform 15 per cent rate.
Globally, Bangladesh’s tax-GDP ratio is less than 10 per cent which should be around 15 to 16 per cent. The only way to increase tax-GDP ratio is to increase revenue from VAT. The NBR said the 15 per cent standard rate would remain in sectors such as cigarette, telecom and gas. The NBR also said the VAT-free turnover limit would be increased to Tk 50 lakh from existing Tk 36 lakh. The ceiling of turnover tax would be increased to Tk 3 crore from Tk 80 lakh, and the rate of turnover tax would be hiked to 5 per cent from 3 per cent at present.
We hope this time, the government and the NBR would also be rationale in slotting VAT for different goods as at the end the VAT levied on ordinary people who are in a dire crisis of unemployment. The government should extend the VAT net and introduce property tax to increase the revenue income, although the quality expenditure and capacity to implement ADP is in a conundrum.
