Govt rejects IMF's suggestion on full re-drafting of VAT law
Saturday, 20 December 2008
Doulot Akter Mala
The government has rejected an International Monetary Fund (IMF) suggestion on complete re-drafting of VAT law for streamlining collection of consumption tax, officials said.
They said the IMF proposed agenda on complete re-drafting of VAT (value added tax) law will affect the government's effort to simplify tax collection from services sector.
The government has taken the position after reviewing the IMF reform agenda that was submitted to the finance adviser last month.
The main proposal of IMF includes segregating VAT from excise by forming 'excise law', separating supplementary duty (SD) from VAT to avoid distortion in VAT collection.
"IMF has suggested framing a separate 'excise law' to collect tax from some specific sectors, while the revenue board is now in a process of phasing out the segment of excise," said NBR member (VAT) Muhammad Alam.
VAT includes supplementary duty at local stage, excise duty and turnover tax.
"Three wings of NBR -- customs, VAT and income tax -- already face lack of manpower and logistic support. The government will not be able to shoulder burden of another department (excise) in the present context," he said.
The IMF has criticised the existing VAT system as distorted one due to introduction of too many flat rates.
"The government has spread a blanket of VAT net over the service sectors for familiarising the concept. It is one of the major reasons that the tax authorities have permitted a number of flat rates of VAT," the NBR member said.
The IMF has suggested imposition of VAT on the basis of value addition at a rate of 15 per cent rather than variable rates, Mr Alam said.
"Considering the socio-economic perspective the finance ministry has found that complete re-drafting of VAT law will make the existing VAT system more complex," he said.
In the present context, the government could consider some of the proposals of IMF like phasing out flat rates of VAT, expansion of large taxpayers' unit (LTU) and automation in VAT offices.
The government introduced VAT in 1991, which drew resentments from the businesses.
The then government, however, took a flexible policy to make the newly imposed system popular.
Re-drafting of VAT law is one of the main IMF conditions tagged with its development support credit for modernising revenue administration.
Bangladesh introduced the VAT nearly two decades ago, replacing the excise duty system in a bid to collect more revenue.
The IMF has been discussing with the NBR on VAT reforms over the last one year as part of its suggestions to improve revenue generation.
The government has rejected an International Monetary Fund (IMF) suggestion on complete re-drafting of VAT law for streamlining collection of consumption tax, officials said.
They said the IMF proposed agenda on complete re-drafting of VAT (value added tax) law will affect the government's effort to simplify tax collection from services sector.
The government has taken the position after reviewing the IMF reform agenda that was submitted to the finance adviser last month.
The main proposal of IMF includes segregating VAT from excise by forming 'excise law', separating supplementary duty (SD) from VAT to avoid distortion in VAT collection.
"IMF has suggested framing a separate 'excise law' to collect tax from some specific sectors, while the revenue board is now in a process of phasing out the segment of excise," said NBR member (VAT) Muhammad Alam.
VAT includes supplementary duty at local stage, excise duty and turnover tax.
"Three wings of NBR -- customs, VAT and income tax -- already face lack of manpower and logistic support. The government will not be able to shoulder burden of another department (excise) in the present context," he said.
The IMF has criticised the existing VAT system as distorted one due to introduction of too many flat rates.
"The government has spread a blanket of VAT net over the service sectors for familiarising the concept. It is one of the major reasons that the tax authorities have permitted a number of flat rates of VAT," the NBR member said.
The IMF has suggested imposition of VAT on the basis of value addition at a rate of 15 per cent rather than variable rates, Mr Alam said.
"Considering the socio-economic perspective the finance ministry has found that complete re-drafting of VAT law will make the existing VAT system more complex," he said.
In the present context, the government could consider some of the proposals of IMF like phasing out flat rates of VAT, expansion of large taxpayers' unit (LTU) and automation in VAT offices.
The government introduced VAT in 1991, which drew resentments from the businesses.
The then government, however, took a flexible policy to make the newly imposed system popular.
Re-drafting of VAT law is one of the main IMF conditions tagged with its development support credit for modernising revenue administration.
Bangladesh introduced the VAT nearly two decades ago, replacing the excise duty system in a bid to collect more revenue.
The IMF has been discussing with the NBR on VAT reforms over the last one year as part of its suggestions to improve revenue generation.