Economists on Wednesday suggested that the government should cut the value-added tax rate from the 15 per cent flat rate proposed in the new law to reduce the tax burden on consumers. At a roundtable discussion on the concerns and implementation challenges of new VAT and Supplementary Duty Act-2012, they said that a reduced VAT rate would decrease adverse effect of financial inequality and inflation on mass people.
Essential products consumed by low-income group of people of the society should be exempted from payment of VAT, they said.
Centre for Policy Dialogue organised the discussion at a hotel in Dhaka.
Former adviser to the interim administration Mirza Azizul Islam said that this was an appropriate
time to reduce VAT rate in the country as the government was reviewing the law.
A reduced rate increases compliance rate of the law, enhance productivity in businesses as well as ensure economic and social equity through reducing inflation, he said.
‘The final burden of VAT always falls on mass people which is inequitable for poor people as it increases the proportion of their consumption than their income because of payment of VAT,’ he said.
State minister for finance MA Mannan said that essential products including vegetable oil should be exempted from VAT.
He also said that the rate of VAT needed to be reduced from the 15 per cent proposed in the new law which would be implemented from 2016.
‘It is important to cut rate of VAT as higher rate affects inflation and consumption of goods,’ he said.
There are multiple VAT rates including truncated and package VAT system in the current law.
Mannan also opined against a provision of the new law which empowers the VAT administration to freeze bank accounts of the businesses to collect unpaid taxes.
‘The provision should be reviewed and no bank account should be frozen without instruction of court,’ he said.
Federation of Bangladesh Chambers of Commerce and Industry president Kazi Akram Uddin Ahmed demanded that the new law should be amended with inclusion of truncated and package VAT systems so that businesses could accept it.
The National Board of Revenue should also give importance on the opinion of business community regarding any changes in the taxation system.
Policy Research Initiative executive director Ahsan H Mansur said that businesses would have to pay VAT for ensuring economic development of the country, otherwise the country would have to leave all welfare initiatives and development activities.
NBR member (VAT policy) Jahangir Hossain said that the law was formulated to simplify and modernise the VAT procedure to remove hassles businesses face faced.
CPD executive director Mustafizur Rahman presided over the discussion while its research fellow Towfiqul Islam Khan presented the key note paper on the law.
Former NBR chairman Abdul Mazid, SME Owners Association president Ali Zaman, World Bank lead economist in Bangladesh office Zahid Hossain spoke, , among others, at the discussion.
-With New Age input
