To secure a new loan program from the International Monetary Fund (IMF), the National Board of Revenue (NBR) is planning to phase out VAT exemptions by 2030 and implement a uniform 15% VAT rate.
However, the government has proposed keeping essential food items, education, healthcare, and public transportation out of this scope.
This information was learned on Tuesday (October 20) from National Board of Revenue (NBR) sources.
An NBR delegation recently presented this reform plan during a meeting with the IMF's technical committee in Washington.
The revenue reform proposals and implementation plans are expected to be evaluated during an upcoming visit by a high-level IMF delegation to Dhaka in November.
Currently, over 500 goods and services—including electronics, computer products, the metro rail, restaurants, apparel, steel, aluminum, sanitary napkins, and diapers—benefit from reduced VAT rates ranging from 2% to 10% or complete exemptions.
If these benefits are withdrawn gradually, the prices of these products and services could rise.
Package-based VAT benefits for gas and electricity supplies, as well as small and medium enterprises, are also under review.
An initiative to introduce a single 15% VAT rate in 2015 stalled due to opposition from the business community.
Concerns remain that businesses may again object to the proposed rate and implementation strategy.
However, the NBR's plan remains at the proposal and discussion stage.
According to the NBR plan, all types of VAT (Value Added Tax) exemptions will be phased out by 2030. Concurrently, there is a plan to implement a nationwide uniform 15% VAT rate.
Speaking on condition of anonymity, a senior NBR official stated that obtaining an IMF loan comes with conditions, including the removal of tax exemptions, tax rationalization, simplification of the tax collection process, and increasing the tax-to-GDP ratio.
Since the government is pursuing a new loan agreement with the organization, several revenue-sector reforms must be executed according to their terms.
However, the country's socio-economic conditions will be taken into account during the implementation of these reforms.
NBR sources indicated that a high-level IMF delegation will visit Dhaka during the first week of November to evaluate the framework for the new loan and revenue reforms.
The plan to reduce VAT exemptions was presented to the IMF technical committee as part of the initial discussions for this new program.
Under an earlier $4.7 billion loan program approved in January 2023, Bangladesh had committed to boosting revenue collection and executing deep reforms in the banking and energy sectors.
According to the latest NBR report, the revenue lost due to various tax concessions and relief facilities in FY23 exceeded Tk1.29 lakh crore, equivalent to 3.3% of the country's total GDP.
During the same fiscal, the NBR's actual VAT collection was Tk1.25 lakh crore—meaning the amount exempted was higher than the amount actually collected.
Attending an IMF conference in Thailand recently, Finance Minister Amir Khasru Mahmud Chowdhury stated that meeting certain conditions is necessary to secure loan assistance from the IMF.
Discussions regarding a new program have taken place, and while conditions will exist, they must be fulfilled, with consensus reached on key issues through negotiation.