BB wants waiver of 15pc VAT on commission

The central bank has mooted a proposal to waive the existing 15 per cent value-added tax (VAT) levied on commission that banks get through the sale of prize bond and savings certificates.
Officials said the Bangladesh Bank (BB) has placed a proposal with the Ministry of Finance (MoF) in the process of this VAT exemption, as it is seen as 'double taxation' on banks' incomes.
Currently, scheduled banks receive commission at a rate of 1.0 per cent and 0.50 per cent from the sales of state sponsored prize bond and savings tools respectively.
In a letter to the Internal Resources Division (IRD) under the MoF, Joint Director of Bangladesh Bank's debt management department (prize bond, savings certificate and savings bond department) Md Shamsul  Huq said banks pay 42.50 per cent corporate tax on their annual incomes that also include the commission amounts from prize bond and savings certificates.
The IRD recently forwarded the letter to the National Board of Revenue (NBR) for its opinion.
"Deduction of 15 per cent VAT will be considered 'double taxation' as the deduction of income tax and VAT would be done from the same sector," says the BB letter.
The central bank also referred the Income Tax Ordinance 1984, section 52AA and 53E that exempted scheduled banks from payment of 10 per cent tax at source from the commission amount.
"Bangladesh Bank thinks that deduction of VAT would leave a negative impact on sale of prize bond and savings certificates by scheduled banks," the letter says to justify the proposed tax waiver.
Talking to the FE Monday, a senior BB official said it's a long-pending demand of the central bank as it considers levying this VAT as 'double taxation'.
"We sent letters several times to the IRD for looking into the issue," he added.
Terming it a 'service sector', the VAT wing has demanded 15 per cent VAT on commissions from savings tools and prize bonds, he said.
A senior VAT official told the FE that the wing is yet to receive such letter to respond.
"NBR has adopted a policy to offer less exemption in a bid to meet the tall revenue target. Any exemption of tax in the middle of a financial year affects the tax-revenue collection growth," he said.  
A large sector is enjoying tax exemption, causing poor tax-GDP growth in the country, he added.
Responding to queries from the FE, he said there are many sectors where income tax and VAT are payable from same sources. "It won't be a double taxation."
The NBR imposed VAT on all types of services across the board, he noted.
Smooth collection of the value-added tax is needed for achieving the revenue- collection target for FY 2015-16. The government has set a Tk 1.76-trillion target for the revenue board in the current FY. Of the target, the VAT wing has to net Tk 639.02 billion.
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