Move to introduce new VAT law suspended

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Doulot Akter Mala
The government has suspended a move to introduce a new Value Added Tax (VAT) law as authorities find it difficult to make business-friendly rules before the end of current fiscal year on June 30 next.
The high-powered committee has stopped the process of preparing the new VAT rules as it sees the time insufficient for consultations with the stakeholders, VAT officials said.
The government has also found the present business context not suitable for adopting the fresh rules, they said.
However, the government will bring some changes as usual in fiscal measures in the new budget, they added.
The committee, led by economist Dr. Ahsan H Mansur, has started function- -ing in November, 2009 and completed a draft law in February, 2010.
The government wanted to introduce the new law through finance bill of 2010-2011, replacing the existing law, which has been distorted by regular changes.
"We have not much time before the start of next fiscal to discuss with the stakeholders and examine the implications of the new VAT law," said Dr. Mansur, who is executive director of local think-tank Policy Research Institute (PRI).
Consultation with the local business is necessary before framing the new VAT law, he said stressing the need for at least six months time for discussion with the stakeholders.
The draft VAT law will be discussed and reviewed in the next fiscal for adopting in 2011-12, he said.
The NBR will amend the existing the law for the upcoming budget.
The committee has proposed to bring some vital changes in the VAT law through budget for 2010-2011, he added.
Introduction of account-based auditing system, electronic submission of VAT return, simplification of return process, introduction of document-based tax administration and recruiting large number of auditors are the major proposals that the committee has made to include in the upcoming budget.
The committee also proposed to impose 15 per cent VAT on some specific sector withdrawing the truncated rates and tariff value, he said.
A senior VAT official said the government would stress on the mandatory VAT return system in the next budget.
"It is necessary to overhaul the existing VAT law to expand its net. VAT collection is still depended on some few sectors including cigarette companies, cell phone operators and gas companies," said the official.
Online submission of VAT return can improve the existing situation and enhance tax compliance of VAT depositors, he said.
Although there are 0.65 million registered VAT payers only 50,000 of them submit returns regularly, he added.
Field offices do not have specific data on how many VAT payers are registered with them, the official said.
Officials said VAT, both local and import stage, has emerged as a major revenue collection wing of the revenue board that collects 54 per cent of the total tax revenue.
In a recent visit to Bangladesh, a high-powered mission of IMF has also urged the NBR to introduce the new VAT law as it has found distortions in the law causing huge revenue leakage.