Monday, December 11, 2017

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 BdST

bdnews24

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.