Indecision is over, finally

The new VAT (value added tax) Act passed in 2012 will now come into effect from the first day of the fiscal 2017.
It was supposed to be enforced from July 01 this year. But staunch opposition from the businesses had forced the government to change the plan and review their suggestions.
The single VAT rate as has been provided for, under the new VAT law, is being opposed tooth and nail by the businesses.
But Finance Minister AMA Muhith has finally made up his mind to go ahead with the single VAT rate.  
"I had thought multiple rates would be better, but after listening to all kinds of arguments, I have changed my mind", the finance minister was quoted as saying in the media.
Finance Minister AMA Muhith, who finally announced the decision on the schedule of VAT implementation after his meeting with an International Monetary Fund (IMF) mission at his office, last Monday, did know the decision on single rate of VAT would not go well with the businesses. Yet there was no option left before him.
When the government had put the new VAT law under fresh review, the IMF took exception to the move and wrote to the ministry of finance (MoF) not to 'water down' the law.
The IMF's insistence on replacing the existing, what they termed as outdated, VAT law with a new one was not without any reason. The current law has many loopholes that are being exploited to the utmost by a section of unscrupulous businesses and dishonest tax officials.
In addition to introducing a single rate of VAT, the new law includes provisions that would help widen the tax-base and ensure tax payments on the basis of actual transactions values instead of values that are often fixed arbitrarily.  
However, the Finance Minister might have tried to 'satisfy' the businesses by delaying the implementation of the Act and raising the ceiling of the VAT-free annual turnover of small traders to Tk.3.0 million.
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), the country's apex trade body, has been opposing the move to introduce single rate of VAT.
The government is pledge-bound to put into effect the new VAT law which is viewed by the IMF as the centerpiece of the ongoing tax reforms measures in Bangladesh.
The multilateral lender maintains that the new VAT act has the potential to generate more revenue for the government provided it is properly implemented and effectively administered.  
The dilly-dallying over the execution of the VAT law, apparently, irked the IMF, resulting in the delay in the disbursement of last two instalments of the ECF (extended credit facility) worth $280 million.
The government can do without $280 million. But it can hardly afford any IMF wrath over non-fulfilment of its pledge made beforehand. Such a course of action might also prove very costly in the end.
The FBCCI which has been dealing with issues concerning the new VAT law with the government is dissatisfied. It has complained that many of their valid recommendations had been ignored during the adoption of the law by the parliament.
However, following intense pressure from the businesses, the government had formed a committee to review the demands of the businesses. The committee suggested 10 major changes in the new law and some of the changes were contrary to a number of suggestions made by the IMF.
Unless anything unusual happens, the new VAT law is expected to be enforced on the first day of the fiscal 2017. It remains to be seen whether it becomes as effective as its framers wanted it to be.  
With the government's earning remaining almost static and income tax growing at a slow pace, VAT turns out to be the most important instrument for mobilising the maximum volume of revenue.  But it might prove to be a daunting task even to reach anywhere near the potential.  
[email protected]