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WB: Implementation of new VAT law crucial to achieving revenue target

  • Published at 12:36 am June 21st, 2017
WB: Implementation of new VAT law crucial to achieving revenue target
The World Bank has said the implementation of new VAT act would be critical to achieve the ambitious fiscal target in line with the proposed budget for Fiscal Year 2017-18. The global lender, however, pointed out that the implementation of Value Added Tax (VAT) act 2012 would not push the inflation up. Qimiao Fan, World Bank country director for Bangladesh, Nepal and Bhutan, came up with the remark while addressing a function titled “Proposed FY’18 Budget Assessment” in the capital on Tuesday. “The proposed budget is very ambitious based on ambitious macro-economic target. The budget projects 7.4% GDP growth while the total investment rate is projected to rise 30.3%.” On the other hand, the private investment is to see only 0.30% rise, while the total expenditure is projected to grow over 26%, added the WB regional boss. The implantation of new VAT Law would be absolutely critical to achieve the very ambitious fiscal target, he said in his reaction. In the proposed budget of Tk4,00,266 crore, the government has set the target to earn Tk91,254 crore from VAT, which is going to be effective from July with a 15% flat rate. One major benefit of introducing uniform VAT rate for all companies is reduce discrimination in tax system and broaden the tax base, Qimiao said. “To that end, I do believe that introduction of VAT is investment friendly as it eliminates discrimination in existing tax system.” In achieving the ambitious macro-economic growth, particularly 7.4% GDP growth, the global lender suggested significant structural reforms to improve investment climate, reduce the anti-export base trade policy, facilitate international money transfer and make easier rules for remittance. Meanwhile, the World bank thinks that an effective implementation of VAT will not put much impact on inflation. “Since essential goods have been kept out of VAT purview and VAT exemption turnover limit has been increased, its implementation will not impact people, especially those lower income groups,” said Zahid Hussain, WB lead economist. But a negative publicity of VAT may shoot up inflation, he said. Stressing the implementation of VAT act, Zahid said it  has already been delayed by five years making excuses for business people’s capacity. He argued that if the implementation process starts, it will encourage people to be equipped. WB termed the proposed budget “Long on hopes, short on assurance” since there is no specific plan for implementation. In order for ensuring an effective implementation, the World Bank stressed the need for increasing institutional and administrative capacity. Replying to a question on the excise duty on bank account, Zahid said a hike in excise duty on bank accounts does not give good indication, rather, it may discourage people from keeping the money in the banks. Her argued that the government is trying to enhance financial inclusion and improve transparency to stem illegal capital flight. In response to another question, the economist said the proposed budget would be investment friendly if the government ensures One-Stop Service in true sense as promised in the budget. In the concluding remarks, the global lender suggested setting an achievable target, alongside maintaining fiscal pace, enhancing efficiency and bringing reforms to banking sector.
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