Bangladesh plans to introduce two-slab VAT rates from 2020, Muhith says

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https://bdnews24.com/business/2017/...duce-two-slab-vat-rates-from-2020-muhith-says
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Bangladesh plans to introduce two-slab VAT rates from 2020, Muhith says
Abdur Rahim Harmachi, from Washington, DC, bdnews24.com

Published: 2017-10-13 02:55:15.0 BdST Updated: 2017-10-13 03:06:39.0 BdST

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After backtracking on the uniform rate of value added tax, the Awami League is planning to introduce tow-tier VAT if it is re-elected in the next parliamentary election.

Finance Minister AMA Muhith has revealed the plan to implement the new VAT law with the two thresholds - one from 7 to 10 percent and the other 15 percent - instead of the uniform rate of 15 percent.

He spoke to bdnews24.com at Washington DC after meeting International Monetary Fund Deputy Managing Director Mitsuhiro Furusawa on the sidelines of the IMF-World Bank annual meetings on Wednesday.

Muhith said the new biform rate of VAT would be effective from 2020.

The next general election is slated between December 2018 and January 2019.

The finance minister proposed the 15 percent uniform VAT rate in the budget for 2017-18 fiscal year, but Prime Minister Sheikh Hasina suspended it for two more years.

The government eventually kept the existing multiple rates.

Following IMF recommendation, the government passed the Value Added Tax and Supplementary Duty Act in 2012 with the 15 percent uniform VAT rate after years of discussions.

The new law had been scheduled to be effective from July 2016, but the government deferred it by a year following protests by the businesses. The existing package VAT rates were increased instead.

Quoting the prime minister, Muhith told bdnews24.com: "It's not a good time to implement the 15 percent uniform VAT rate."

He added, "And the election is nearing. That's why we decided to defer the implementation of the law by two more years considering the overall situation. Now the next government will implement the new VAT law and that will be in 2020."

Muhith is confident that the Awami League will be in power at the time.

He also said IMF DMD Furusawa wanted to know why the government failed to implement the VAT law.

"I've informed him about our real condition," the finance minister said.

"I've told him that the new VAT rates will have two slabs - one from 7 to 8 or 10 percent, which is 3 to 4 percent now. The other will be 15 percent," he added.

Muhith led the Bangladesh delegation in the meeting at the World Bank Headquarters on the opening day of the IMF-Worlds Bank meetings, which will end on Oct 16.

The others of the 15-strong Bangladesh delegation include Bangladesh Bank Governor Fazle Kabir, Finance Secretary Mohammad Muslim Chowdhury, Economic Relations Division Secretary Kazi Shofiqul Azam, and World Bank Alternate Executive Director for Bangladesh, Bhutan, India and Sri Lanka Muhammad Musharraf Hossain Bhuiyan.

The finance minister spent a busy first day at the World Bank-IMF meetings.

Besides Furusawa, he met World Bank CEO Kristalina Georgieva and Vice President at the World Bank for the South Asia Region Annette Dixon, and IMF Multilateral Investment Guarantee Agency DMD Keiko Honda.

 

[Michael Corleone]

Muhith can **** all.

 

[UKBengali]

Muhith can **** all.

BD has the lowest Tax collection as a percentage of GDP in the whole of S Asia. It is currently 10% and so something must be done to increase this - - it should be ideally be around 15-20% at BD's level of development. This new law may not be perfect but it will certainly increase revenue which is critical as government needs more money to spend on infrastructure, defence and education.

 

[Michael Corleone]

BD has the lowest Tax collection as a percentage of GDP in the whole of S Asia. It is currently 10% and so something must be done to increase this - - it should be ideally be around 15-20% at BD's level of development. This new law may not be perfect but it will certainly increase revenue which is critical as government needs more money to spend on infrastructure, defence and education.

Increase in tax without controlling inflation and increasing people's basic income will lead to a disaster.

 

[UKBengali]

Increase in tax without controlling inflation and increasing people's basic income will lead to a disaster.

Wages are rising in BD(10%) and inflation is at around 5%, which is not particularly high and importantly
lower than wage increase.
Tax will not be uniform at 15% like proposed before but at different and mainly lower levels.
If it goes wrong, it can always be reversed but BD cannot get to the next level of development without raising
taxes one way or another.

 

[Michael Corleone]

Wages are rising in BD(10%) and inflation is at around 5%, which is not particularly high and importantly
lower than wage increase.
Tax will not be uniform at 15% like proposed before but at different and mainly lower levels.
If it goes wrong, it can always be reversed but BD cannot get to the next level of development without raising
taxes one way or another.

don't you think govt. should look into alternative source of income by industrialisation, outsourcing work etc?

 

[EastBengalPro]

Ooh No Its Vatman again

 

[UKBengali]

don't you think govt. should look into alternative source of income by industrialisation, outsourcing work etc?

Yes but that will not come quickly.
BD has a massive problem in that it cannot extract enough tax from it's 250 billion US dollar GDP.
The reason that government has gone for VAT is that it is relatively easy to collect. Other forms of
tax like Income tax are quite easy to evade by a lot of people in BD due to lax enforcement and
corruption.
We will need to wait and see but as wages are rising at 4-5% a year in real terms, maybe the economy
can absorb this increase and many billions of US dollars extra can be raised each year by the government.

 

[Michael Corleone]

Yes but that will not come quickly.
BD has a massive problem in that it cannot extract enough tax from it's 250 billion US dollar GDP.
The reason that government has gone for VAT is that it is relatively easy to collect. Other forms of
tax like Income tax are quite easy to evade by a lot of people in BD due to lax enforcement and
corruption.
We will need to wait and see but as wages are rising at 4-5% a year in real terms, maybe the economy
can absorb this increase and many billions of US dollars extra can be raised each year by the government.

is it also true that many people in bd evade taxes especially the richest ones?

 

[UKBengali]

is it also true that many people in bd evade taxes especially the richest ones?

I would think, just like all other countries in the world. BD's corruption would make matters worse.

Income tax cannot raise tax from most of the general population due to low wages -currently Income tax applies to those earning more than 250,000 Taka per annum I think. Income Tax cannot substantially aid in revenue collection just yet unless the government starts to tax typical wage earners or a way is soon found to cut out evasion from most of the richer tax evaders.

 

[idune]

indian stooge awami regime and its rubbish finance minister should get tax from

1) 1 million illegal indians who are siphoning close to $6 billion dollars working in Bangladesh illegally. These illegal indians have not been paying any tax and will give huge tax boost.
2) impose land import tax/levy for import coming through land border ports.

 

[Michael Corleone]

I would think, just like all other countries in the world. BD's corruption would make matters worse.

Income tax cannot raise tax from most of the general population due to low wages -currently Income tax applies to those earning more than 250,000 Taka per annum I think. Income Tax cannot substantially aid in revenue collection just yet unless the government starts to tax typical wage earners or a way is soon found to cut out evasion from most of the richer tax evaders.

I think bd should relax income tax and instead tax based on how fat the bank account is. Also should lift tax off property owning, vehicles etc.

 

[UKBengali]

I think bd should relax income tax and instead tax based on how fat the bank account is. Also should lift tax off property owning, vehicles etc.

Bank account tax would not work as people will then start to place money in relatives accounts and even move offshore and so hidden from BD tax authorities.

Property tax is coming in I think. Carbon tax on vehicles has been scrapped due to lobbying from transport lobby.

 

[Michael Corleone]

Bank account tax would not work as people will then start to place money in relatives accounts and even move offshore and so hidden from BD tax authorities.

Property tax is coming in I think. Carbon tax on vehicles has been scrapped due to lobbying from transport lobby.

Property tax is a shitty idea. They're just bringing their govt. end on themselves.

 

[UKBengali]

Property tax is a shitty idea. They're just bringing their govt. end on themselves.

UK gets more than 10% of revenue from property taxes. Real estate in Dhaka and large cities is very expensive.
If implemented correctly it could bring in huge revenues to the government.