WB to preview financial flipside of new VAT law

Doulot Akter Mala | Published: October 23, 2016 00:00:00 | Updated: February 01, 2018 00:00:00

The World Bank will take a final look at the potential impact of the Value Added Tax and Supplementary Duty (SD) Act 2012 on the economy, especially on general prices and income distribution, before its enforcement. Â
Officials said a WB mission would make a preview of the flipside of slapping a uniform 15 per cent VAT rate for all businesses under the law effective from next fiscal year.Â Â
The new law, scheduled to come into force from July 01, 2017, would replace the existing VAT law, framed in 1991.
A WB technical assistance mission on micro-simulation model is scheduled to visit the country from today (October 23) to November 04 doing a thorough impact assessment.
The team comprises Jose Eduardo Gutierrez Ossio, senior public-sector specialist, Sergio Medinacelli, micro-simulation expert, Nusrat Mehzabeen and Shegufta Shariar as team assistant.
They will interact with the Project Implementation Unit (PIU), Project Management Consultants (PMC) and National Accounts Wing (NAW).
During the mission, the international experts in conjunction with the indicated counterparts will frame and develop a micro-simulation model for introduction of the new VAT law from next fiscal year, officials said.
The mission would prepare report on the findings and make recommendations on the basis of the interaction outputs.
There is a concern over escalation of prices after implementation of the new law as it would slap 15 per cent uniform rate of VAT to be charged from customers at all businesses.
The government has allocated Tk 5.56 billion for the VAT online project (VOP) meant for doing groundwork for implementation of the new taxing law. Of the funds, the WB has assured of providing $60 million as DLR at 0.5 per cent interest. Application of the new VAT law requires an interlinked network support as all of the activities under the law will be automated.
The online system is being developed under SEP software. Vietnamese company FPT is the licence-holder of SEP. SEP is a worldwide recognized software for accounting.
The government plans a modern VAT administration by using several tools for taking scientific and professional decisions. Through micro-simulation it can be assessed how much money government could lose or gain with the possible new VAT measures or rates.
A senior VAT official said the VOP sent a proposal to the WB for providing technical assistance on three issues, including micro- simulation on different areas and TADAT, and assigning one VAT expert to help in monitoring both PMC and FPT.
"The technical mission may be coming to assess the impact in response to the proposal of the VAT wing," he said.
Through TADAT the VAT authorities can also project revenue impact of the new law.
Tax Administration and Diagnostic Assessment Tools (TADAT) is designed to provide an objective assessment of the health of key components of a country's system of tax administration.
This framework is focused on nine key performance-outcome areas (POAs) that cover most tax-administration functions, processes and institutions.
TADAT assessments are particularly helpful in identifying the relative strengths and weaknesses in tax-administration systems, processes and institutions, facilitating a shared view on the condition of the system of tax administration among all stakeholders (e.g., country authorities, international organizations, donor countries, and technical assistance providers), setting the reform agenda.
The recipe elucidates reform objectives, priorities, initiatives, implementation sequencing and so.
doulot_akter@yahoo.com