A row between the government and the International Monetary Fund (IMF) has emerged after the finance ministry refrained from pledging implementation of a five-point condition on value added tax the international lender tagged with disbursement of the next tranche of ECF fund. The refusal or indecision on the part of the ministry in implementing the VAT law has led to non-issuance of any memorandum by the IMF at the end of a two-week visit by an IMF mission that ended on Tuesday, a senior finance ministry official said.
The latest negative stance of the finance ministry on changing the existing VAT regulations was in part because of opposition from private sector and siding of an influential cabinet minister of the government with the cause of businesses, it was learnt.
The IMF delegation in its long discussions with the finance ministry officials asserted that finance ministry must agree to promulgate the revised launch date of July 2016 for the new VAT by issuing a gazette notification, publishing the combined tender for the procurement of the software and hardware to enable introduction of the new VAT regime and a formal approval by finance minister AMA Muhith by the end of this year outlining the revised VAT implementation timetable.
Besides, the conditions of the IMF also include finalising the tender process by June next year on procuring the combined hardware and software to make the VAT law effective, obtaining their approvals from the cabinet committee on purchase latest by December this year and employing adequate human resources for the VAT project implementation unit within the NBR.
The IMF mission led by Rodrigo Cubero visited Dhaka from September 17 to 30 to conduct discussions on the fifth review of a three-year Extended Credit Facility arrangement.
The IMF board in April 2012 approved around $ 1 billion for Bangladesh of which $ 704 million has already been released in five installments. Before releasing each installment, the IMF reviews progress of the reforms it suggests.
The sixth installment is due within couple of months after the IMF board approves. The disbursement of the sixth tranche of over $100 million would depend on the review by the visiting IMF mission, finance ministry officials said.
‘The next tranche hangs on the balance as we are yet to reach a consensus on reforms to be carried on the VAT regime,’ a finance ministry official told New Age.
The new VAT and SD law (VAT law), passed by parliament on November 2012, was originally scheduled to take effect on July 1 next year.
Under the new VAT law, the existing package of truncated system of VAT and tariff value system to determine the VAT amount would no longer exist, and would be replaced by uniform 15 per cent VAT.
However, small and medium enterprises with Tk 24 lakh or below annual turnover would remain out of the purview of the new VAT system.
Business communities at a recent seminar in presence of finance minister AMA Muhith and commerce minister Tofail Ahmed vehemently opposed the introduction of new VAT law.
Tofail backed the business community at the meeting and urged the finance minister to discuss the VAT law with business people before making the law effective.
Officials at the National Board of Revenue said private sector has long put objections on any sort of reforms as the decade-old current VAT law has become obsolete that only deprives the government exchequer.
Officials at the finance ministry said Muhith would hold discussions with senior IMF officials in Washington DC next week to convince the multilateral lending agency to soften its stance on the VAT law.
-With New Age input
