Govt suspends 15% uniform VAT decision for two years

The Bangladesh government will follow the existing multiple rates of value-added tax for the next two fiscal years, Prime Minister Sheikh Hasina has said in parliament.

It means the government has reversed its initial plan for a 15 percent uniform VAT rate.

The VAT rate will remain unchanged because there were debates on the issue, Hasina said before Finance Minister AMA Muhith placed the finance bill for fiscal 2017-18 on Wednesday in the House.

Hasina said businesspeople are not agreeing with the proposal. "So please make it that way, for the next two years. Please keep the VAT collection system as it is now," Hasina said advising Muhith to reverse his proposal.

She also spoke about the history of the VAT law. “It was made in 1991. A draft was made in 2008 for a revision.

“We passed the law in 2012 after discussing it with all. Now everyone has forgotten that we passed the law,” she said.

The uniform value-added tax, which was to be effective for the next three years as per Muhith’s earlier proposal, ran into opposition from business leaders.

According to Muhith, though 850,000 taxpayers have been registered under VAT, only 32,000 have paid their dues.

Muhith proposed a Tk 4 trillion budget for the next fiscal year, with Tk 2.88 trillion of the total expenditure expected to come from revenue earnings.

Analysts said the large budget would likely hike the cost of living as a side-effect of the revenue earning demands to fund the financial outlay.

Discussions concerning the new VAT law have been underway since 2009. The government wanted to implement the Value Added Tax and Supplementary Duty Act of 2012 from July 1 last year but scrapped the plan following intense protests by the trade bodies.

The rates of package VAT, which is retained now again, were raised instead.

Since the plan was shelved last year, the finance minister had been saying the law would be implemented from July 1 this year.

The 84-year-old finance minister, who placed his ninth budget on the trot, had to face most criticism for his proposal to increase excise duty on bank deposits and the implementation of new VAT law.

MPs in parliament went as far as to demand his resignation for these proposals. Later his Cabinet colleagues stood by him.