World Bank for VAT law implementation, slams excise duty on deposit

The World Bank on Tuesday said it believes implementation of the VAT law will not push up inflation rates in Bangladesh. However, it also heavily criticised the finance minister’s proposal of imposing excise duty on bank deposit, saying such move will discourage people to use the banking channel. During a briefing in Dhaka on Wednesday, Qimiao Fan, country director of the global lender, also warned the government by saying that the implementation of the VAT Act 2012 was absolutely critical to meet the very ambitious fiscal targets set in the proposed budget. The briefing was organised to highlight World Bank’s assessment on the proposed national budget for the next fiscal, unveiled by Finance Minister AMA Muhith on June 1, with an expected cost of Tk4tn against revenues of Tk2.93tn.Fan, since his appointment in March 2016, had called for implementation of the VAT law multiple times on several occasions. Zahid Hussain, World Bank’s chief economist in Bangladesh, said since the essential goods have been kept out of VAT purview and the turnover limit of VAT exemption has been increased, the implementation of VAT will not impact people living especially the lower income group. However, he cautioned that negative publicity on VAT may increase inflation. Stressing on the implementation of VAT Act, Zahid said it is already delayed by five years as businessmen were uninterested citing capacity issues. He argued that if the implementation process starts, it would encourage businessmen to be equipped by themselves. The WB chief economist, however, came down hard on the proposed excise duty on bank deposit, saying it “may discourage people to keep the money in banking channel.”