The government will introduce a single rate of value added tax (VAT) from July 2016, Finance Minister AMA Muhith said yesterday.
He expressed the determination by ignoring recent objections from the business community against the move being made under a proposed amendment for the VAT Act 2012.
The VAT turnover ceiling would be raised above Tk30 lakh from the existing Tk24 lakh to allow small and cottage industries grow, the minister added.
He made the remarks after meeting a visiting six-member team of the International Monetary Fund’s (IMF) Extended Credit Facility (ECF) programme, led by IMF Deputy Division Chief for the Asia and Pacific department Rodrigo Cubero, at the Finance Ministry.
Claiming that he earlier preferred the multiple VAT rate system, Muhith said he was now convinced by the IMF team to choose otherwise.
Muhith said the new single VAT rate would be disclosed during the budget announcement for the next fiscal year. Decision on whether to keep the existing 15% retail-level VAT would also be announced then, the minister added.
Muhith also said the VAT Act 2012 will be amended after the budget announcement.
The release of the final two tranches of the ECF programme, worth around $280m, is now pending upon the decision to amend the existing VAT Act.
Talking to reporters, Muhith further claimed that the business community had no objection against introducing a single VAT rate.
However, on Sunday, at a meeting with the finance minister, leaders of apex trade body FBCCI had voiced their arguments against a single VAT rate.
At the meeting, FBCCI President Kazi Akram Uddin Ahmed also proposed to introduce multiple VAT system instead of a flat 15%, in order to help small businesses.
The FBCCI also argued that the multiple VAT system was being practised in many developed and developing countries such as France, China, Malaysia and other EU countries.
In January, a nine-member panel of the National Board of Revenue recommended the authorities concerned to impose multiple VAT rates, instead of the universal 15% in all areas.
It also recommended raising the ceiling of turnover VAT to Tk36 lakh from Tk24 lakh to facilitate growth of small and cottage industries, especially in the rural area.
Meanwhile, the IMF Mission participated in a seminar organised by Chief Economist’s Unit of Bangladesh Bank at the central bank headquarters in Dhaka yesterday.
The mission members presented several research papers on lending rates, trade elasticity, inflation and economic activities in Bangladesh.
BB Governor Dr Atiur Rahman, Deputy Governors Md Abul Quasem and SK Sur Chowdhury were also present.
Souvik Gupta and Mr. Sohrab Rafiq of the IMF mission presented the papers.
The papers analysed export and import elasticities, trends in core inflation vis-a-vis headline inflation, tracking economic activities via coincident indicators, and interest rate spread behavior in Bangladesh in the global context.
