The implementation of VAT Act 2012 with a flat rate of 15% would be a burden for people as it would increase their living cost.
Ignoring citizens and experts, a wide range of criticism and opposition from businesses, the government is set to fix 15% VAT for almost all products.
The Dhaka Tribune talked to several trade analysts, experts and business individuals when they said a 15% VAT would surely hike the prices of essential commodities and the consumers would be the most sufferers.
“VAT is basically paid by the consumers. Prices of finished goods have soared immediately, affecting living expenses of the consumers,” former finance adviser to caretaker government AB Mirza Azizul Islam told the Dhaka Tribune.
There would be some essential commodities exempted from VAT.
“There is a term in economics called ‘sympathy price increase,’ which proves that the increase in one product’s price affects another.
“I think VAT rate should be 10% in Bangladesh as most countries in the region enjoy below 15% VAT. The rate should be based on per-capita income,” added Azizul.
The standard VAT rate is 8% in Iran, 12.5% in India based on states, 13% in Nepal and 12% in Sri Lanka, 6% in Malaysia, 7% in Singapore, 10% in Indonesia, 5% in Nigeria and 12% in the Philippines.
Centre for Policy Dialogue (CPD) Research Fellow Towfiqul Islam Khan said: “If 15% flat VAT rate is imposed, prices of almost all products will go up, which is simply a burden on consumers.”
Babosayee Oikya Forum President Abdus Salam told the Dhaka Tribune: “We have been urging the government for long, presenting our logic how the 15% VAT would be a burden on lower-income people as well as the SME businesses.
“The government also assured us of lowering the VAT ceiling, but now the finance minister says it would be a 15% flat rate. If it is 15%, we will stage demonstration.”
According to Consumers Association of Bangladesh (CAB) General Secretary Humayun Kabir Bhauyian, consumers must suffer if 15% VAT is imposed.
“It would also trigger the inflation to go high and people be forced to take to the street against it.”
It is high time that the government considered 100 times before implementing the 15% flat VAT rate on almost all products, CAB Vice-President SM Nazer Hossain told the Dhaka Tribune.
Shafiul Islam Mohiuddin, newly elected president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said: “Implementation of a sensitive and reactive decision like imposing 15% VAT rate should be based on impact assessment study, not emotion or ego.
“We have given a complete suggestion to the ministry, taking into account our businesses as well as the government interest. Ignoring our suggestions, if 15% VAT is imposed, it will be a suicidal decision.”
The government should increase tax-net, rather than imposing 15% VAT, added Mohiuddin.
Finance Minister AMA Muhith on Saturday told reporters at his office: “The VAT rate will remain at 15%, and it will not be reduced.”
He added: “The rate has been in effect since the beginning. We could have reduced it by 1%-2%, but what is the point in doing so?”
Earlier, Muhith spoke of a more comfortable VAT rate amid concerns that application of a uniform 15% VAT would fuel the living costs and affect small and medium businesses.
Under the existing VAT Act 1991, the government collects VAT at varying rates, ranging from 1.5% to 15% on a number of goods and services.
VAT is now the biggest source of revenue for the government, followed by income tax and import duty.