Finance Minister AMA Muhith said the government would issue a circular on VAT law reforms next month with no changes in 15% VAT rate for products and package sale.
“We are not going to reduce the existing VAT rate. IMF feared that the rate would be cut. They set condition not to reduce it for releasing two tranches of ECF (Extended Credit Facility),” he told reporters yesterday after a meeting on amendment of VAT law 2012.
He said the businessmen had changed their first demand to reduce VAT rate and agreed with the continuation of the existing 15% rate.
VAT law reform is one of IMF conditions to release next two tranches of ECF.
“The timely implementation of VAT law is directly related with disbursement of two tranches of ECF and future deals with IMF,” he said.
Finance Secretary Mahbub Ahmed and Bangladesh Bank Governor Dr Atiur Rahman also attended the meeting.
Muhith said the government would invite IMF team to discuss the progress towards fulfilling the condition of VAT law reform.
He said other demands of businessmen on VAT reforms would be addressed in the next fiscal year’s budget announcement.
Earlier, the government decided to resolve disputes over fulfilling two conditions set by the IMF before getting the release of two tranches of ECF fund.
The global lender is expected to disburse around $280m under the ECF.
The IMF conditions include extension of schedule to launch new VAT law and appointment of an international auditor for Bangladesh Petroleum Corporation.
The government high-ups recently asked the finance division to address those issues for expediting the disbursement of IMF credit.
On September 23, regarding VAT reforms, Muhith said the government would not be able to complete VAT reforms this year and that might extend till 2016.
“But I am not sure whether IMF will agree with me,” he added.
Last September, a six-member IMF mission headed by Rodrigo Cubero, deputy division chief, had expressed dissatisfaction over sluggish progress in VAT reforms.
Apart from the two tranches, a fresh deal between the global lender and the government is likely to be halted if the finance division fails to comply with a major IMF condition, apprehends NBR officials.
The fate of two instalments might be decided in March this year.