In fact the Cabinet following a discussion on June 11 had asked the Finance Minister to review the various aspect of the new VAT law and Supplementary Act of 2012 which is being used now to facilitate cheaper import at the cost of local manufacturing. Local business communities have voiced angry reaction on misuse of Supplementary Act and flat VAT rate saying such decisions are counter-productive to business.
The Cabinet opposed 15 percent flat VAT rates despite serious maneuvering by the Finance Minister to implement it. They came out to oppose it fearing that it would create extra pressure on the people and their affordability. Because they could realize unlike the Finance Minister that every business or person has not equal capacity to bear the extra load. It appears that the decision to postpone the New VAT Act and Supplementary Act has been prompted mainly by domestic political grounds — no matter it will destabilize the government revenue target this year. As per estimate 36.8 percent of NBR revenue is scheduled this year to come from VAT. The Prime Minister has asked the Finance Minister to look for other avenues to overcome the revenue losses.
In fact the Finance Minister was imposing extra tax and VAT on everything that comes before him without paying heed to disastrous affect of flat VAT rate on small and big business alike. Even he did not spare to impose Excise Duty on bank balance above Tk 1 lakhs with regressive rates onward. He imposed 15 percent VAT on construction materials forcing business to pay Tk 7,500 VAT on per ton rod from Tk 900 per ton until now. He remained unmoved by the high cost of construction. The 15 per cent VAT on tractors for plantation raised the total tax incidence to 24 percent from 5 percent in the outgoing budget.
It appears he has only one objective to realize the highest amount of revenue for the government to run a highly expensive corrupt regime where people’s expectations have no place and the plight of the businesses was only multiplying.
The Prime Minister has reportedly wanted to know why the Finance Minister has failed to resolve the controversies over the New VAT Act over the past four years and whether there was any negligence to address the core issue that led to the failure and last moment crisis. Many have advised the Prime Minister not to implement the New VAT Act.
More changes will be necessary to alleviate public suffering and anger.
