Meeting revenue target without new VAT law is a critical problem: Muhith

Finance Minister AMA Muhith says it will be tough for the government to meet the revenue target set in the national budget for FY2018 without the new VAT law now suspended for two years.

“I shall not speak about it now. I am having various meetings ... will see what to do,” Muhith said responding to questions from reporters after a meeting at the secretariat on Wednesday.

The government estimated Tk 200 billion in additional income under the new VAT law.

Now that amount "won’t come, there will be less", Muhith said. "How to meet (the revenue target) is a very critical problem."

Muhith rolled out a Tk 4.26 trillion budget for fiscal 2017-18 with an initial plan for a 15 percent uniform VAT rate.

While it had a revenue target of Tk 2.88 trillion, the minister initially aimed to earn over Tk 910 billion from value-added tax or VAT.

But the proposal triggered widespread criticisms that later led Prime Minster Sheikh Hasina to suspend the law for two more years, keeping the existing multiple rates of VAT. That came as a big shock to Muhith’s plan to implement the budget.

Economists said it would force the government to widen the tax net to meet the revenue deficit and pile pressure on the National Board of Revenue.

Responding to a query, the finance minister on Wednesday said it might not be necessary to table a new plan in parliament following the new law’s suspension.

A meeting on these issues will be held on Thursday, he said.

Muhith also clarified that the 1991 VAT law was not in effect at present. “The 2012 law is in effect following amendments. We bring amendments to it every year.”

He, however, added that the online VAT project kicked off despite the delay of the implementation of the new law.