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Tuesday, June 11, 2019

VAT law should be business friendly

The Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) in a recent letter to the National Board of Revenue (NBR) said the proposed VAT law of NBR may fuel inflation and create unrest in the society if implemented from July 1 without adequate readiness. Regarding the matter, NBR and the FBCCI are at loggerheads though NBR assured of taking enough preparation. But past experience leaves the business community in confusion that delayed its implementation for four years already.
Initially, there was a single VAT rate, with which the FBCCI has registered its objection. The NBR said that they are making the VAT law in line with their demand by incorporating multiple VAT rate instead of flat rate. Framed on the prescription of the International Monetary Fund, the new VAT law aims to increase revenue collection and establish transparency and accountability in a country that has one of the lowest tax-GDP ratios (about 9 percent) in the world.
VAT, a type of consumption tax, is the biggest source of revenue for the government, followed by income tax and customs tariff. The new law originally envisaged a uniform 15 percent VAT on goods and services, doing away with the multiple rates under the existing law -- a change that sparked protest from businesses, particularly from the FBCCI on grounds that it would hurt small and medium businesses and stoke inflation. In the face of protests, the government deferred enforcement of the new VAT system law thrice, the latest being in June 2017, when it announced at the eleventh hour of the postponement by two years.
The businesses agreed in principle with the NBR proposal of multiple VAT rates: 5 percent, 7.5 percent, 10 percent and 15 percent. The meeting also decided to increase the VAT-free annual turnover threshold to Tk 50 lakh from the existing 36 lakh. It agreed to increase annual turnover limit to Tk 3 crore from Tk 80 lakh and hike turnover tax to 4 percent from the present 3 percnt.
We believe NBR and FBCCI should come out of the loggerhead over new VAT implementation for the betterment of business and the citizens.