Economist Akbar Ali Khan has said imposing VAT and excise duty at the same time goes against the principle of VAT.
“You must have heard about the recent controversy about excise duty on banking services. VAT follows some specific principles. If you have VAT, there should be no excise duty, but in Bangladesh, there is VAT as well as excise duty,” he said.
“There is no question of raising the excise duty, if we believe in the principle of VAT. If you impose VAT, the excise duty should be abolished altogether. The government could impose VAT on banking services, but it cannot impose excise duty,” he added.
Akbar Ali was addressing a dialogue on the fiscal year 2017-18 budget, organised by Centre for Policy Dialogue at a city hotel on Saturday.
The former bureaucrat said: “The representation of people in the budget process is very poor; this is the major weakness of the budgetary process in Bangladesh.”
“This year, the remarks of ministers and ruling party MPs have proved that they don’t have an opportunity to place their viewpoints in the budget preparation,” he said.
“The flat VAT rate of 15% is very high,” he added.
Amid wide criticism and opposition from business owners, the Value Added Tax (VAT) Act 2012 will be effective from July 1 at a flat 15% rate on almost all products.
The CPD in the budget dialogue expressed apprehension that gas and electricity prices may rise again when the new law becomes effective.
“If the new VAT law comes into force, 15% VAT will be added to the electricity price, boosting the price even further. Besides, the gas price will also be out of reach for the masses,” CPD Executive Director Fahmida Khatun said.
She also proposed that the government set the VAT rate at 12%.
Planning Minister AHM Mustafa Kamal, State Minister for Finance and Planning MA Mannan, Chairman of the Parliamentary Standing Committee in the Finance Ministry Dr Abdur Razzaque, former Commerce Minister Amir Khosru Mahmud Chowdhury, CPD Chairman Rehman Sobhan and CPD distinguished fellow Dr Debapriya Bhattacharya, among others, spoke at the event.
Mustafa Kamal said the parliament is expected to pass the budget, which will be more friendly to the public and acceptable to all, as lawmakers are now taking part in a discussion on it.
“A discussion is taking place on the proposed budget in the parliament. It will pass an implementable and acceptable budget because the present government will not take any step that affects the common people,” he said.
Prof Rehman Sobhan said: “Thinking about the budget size and how much of it has to be implemented is just a matter of numbers, but the key is how much people benefit from the budget.”
He suggested carrying out proper reforms to state-owned banks for increasing private investment.
“A political decision should be taken to come out of the loan default culture and stop providing capital to the state-owned banks.”
According to Amir Khosru Mahmud Chowdhury, implementing the budget is impossible without an equal distribution of assets and political stability.
“The incumbent government is investing in mega projects, instead of human resource development, which will not only lead to more corruption but also waste public funds.”
In his address, Debapriya Bhattacharya said: “A budget cannot be implemented on its own. Implementing a budget requires a congenial atmosphere and institutional framework.”
He recommended that the Finance Ministry play a more responsible role in preparing and implementing the budget.