Mirza Aziz meets IMF team, favours changes in VAT rules
Monday, 17 March 2008
FE Report
Finance and planning adviser Mirza Azizul Islam Sunday said the existing rules and regulations relating to Value Added Tax (VAT) should be overhauled to infuse dynamism in its collection process.
"A comprehensive action plan should be taken to update VAT-related rules and regulations," he said after a meeting with visiting International Monetary Fund (IMF) team.
The major changes in VAT rules, according to him, are imperative to make further growth in revenue earnings as the country's tax-GDP ratio is one of the lowest among the South Asian nations.
The IMF technical team led by Graeme Ludlow submitted recommendations on VAT, Customs and Income Tax policies following the request by the caretaker government which intends to conduct reform in the revenue administration.
Although the IMF team suggested major changes in Income Tax and Customs laws and rules the finance and planning adviser said the VAT rules and its collection procedure needed major changes.
"The existing VAT rules and regulation, operationalised in 1991, are very complicated," he said.
About the IMF recommendations on Income Tax and Customs, he said technical committee under the board will examine those and select suitable ones.
To a query, the finance and planning adviser said the IMF team is a technical one and is now on a visit here following request by the government.
"There is no condition about the tax policies reform," he said, adding that there was also no timeframe to start the reform process.
The finance and planning adviser said the IMF has suggested for automation of the revenue board and also put some suggestions in this regard.
A project on automation, funded by the World Bank, will start from the next calendar year. The IMF suggestions can be integrated during the implementation of the project, said the finance and planning adviser.
August last, the IMF fiscal affairs department submitted recommendations in a paper titled 'At a Crossroads for Tax Policy Reform' where it suggested redrafting of existing VAT act.
"Redraft the VAT Act in its entirety with reference to best practices in other countries," said the IMF.
In Bangladesh, the VAT should extend through to the retail stage, and the sole criterion for tax coverage should be size of the business, regardless of stage at which it is situated.
The focus should be on the design of an appropriate small-business exemption, said the IMF.
The 1.5 per cent Advance Trade VAT (ATV) turnover tax should be abolished, it said, adding that a newly designed VAT in Bangladesh should be adopted to include services levying 15 per cent tax.
Finance and planning adviser Mirza Azizul Islam Sunday said the existing rules and regulations relating to Value Added Tax (VAT) should be overhauled to infuse dynamism in its collection process.
"A comprehensive action plan should be taken to update VAT-related rules and regulations," he said after a meeting with visiting International Monetary Fund (IMF) team.
The major changes in VAT rules, according to him, are imperative to make further growth in revenue earnings as the country's tax-GDP ratio is one of the lowest among the South Asian nations.
The IMF technical team led by Graeme Ludlow submitted recommendations on VAT, Customs and Income Tax policies following the request by the caretaker government which intends to conduct reform in the revenue administration.
Although the IMF team suggested major changes in Income Tax and Customs laws and rules the finance and planning adviser said the VAT rules and its collection procedure needed major changes.
"The existing VAT rules and regulation, operationalised in 1991, are very complicated," he said.
About the IMF recommendations on Income Tax and Customs, he said technical committee under the board will examine those and select suitable ones.
To a query, the finance and planning adviser said the IMF team is a technical one and is now on a visit here following request by the government.
"There is no condition about the tax policies reform," he said, adding that there was also no timeframe to start the reform process.
The finance and planning adviser said the IMF has suggested for automation of the revenue board and also put some suggestions in this regard.
A project on automation, funded by the World Bank, will start from the next calendar year. The IMF suggestions can be integrated during the implementation of the project, said the finance and planning adviser.
August last, the IMF fiscal affairs department submitted recommendations in a paper titled 'At a Crossroads for Tax Policy Reform' where it suggested redrafting of existing VAT act.
"Redraft the VAT Act in its entirety with reference to best practices in other countries," said the IMF.
In Bangladesh, the VAT should extend through to the retail stage, and the sole criterion for tax coverage should be size of the business, regardless of stage at which it is situated.
The focus should be on the design of an appropriate small-business exemption, said the IMF.
The 1.5 per cent Advance Trade VAT (ATV) turnover tax should be abolished, it said, adding that a newly designed VAT in Bangladesh should be adopted to include services levying 15 per cent tax.