The government’s move to implement the new VAT law without rebate facility for reduced rates will hurt consumers because of price spike of many goods and services, analysts said today.
Chartered accountants and economists came up with the observation at the ICAB-The Daily Star post-budget discussion two-day after the government unveiled the national budget for 2019-20 fiscal along with the decision to implement the new VAT law
The new VAT and Supplementary Duty Act 2012 introduced four main rates of Value Added Tax (VAT) shifting away from originally planned uniform 15 per cent VAT throughout the value chain.
Under this system, the rates of VAT would be 5percent, 7.5percent, 10 percent and 15 percent and businesses would be unable to adjust input tax payable against the supplied goods and services if they pay less than 15 percent VAT.
Introduction of so many rates goes against the basic law and cost would go up to 38 per cent in absence rebate facility for reduced rates, chartered accountants and economists said.
“I think it is a complete disaster what the government has done. They have destroyed the 2012 law. It should be labelled as VAT and Excise Duty Act 2019 because it is a combination of VAT and excise duty,” said Ahsan H Mansur, executive director of Policy Research Institute (PRI) of Bangladesh at the discussion at The Daily Star Centre.
“We have really abused by the introduction of the new VAT law. We were better off with the 1991 law and we could have amended it and improve that further,” he said adding the introduction of the system would hurt the development of SMEs.
At the discussion, analysts also cautioned that the government’s ambition to achieve revenue collection target would be unattained given the capacity of the revenue collector.
And, government’s increased dependence on borrowing from banks to finance the deficit in the next fiscal year will increase stress on the ailing banking sector, which suffers from liquidity crunch in the face of soaring default loan, falling deposit and the recent surge in government borrowing.
As a result, the private sector may face difficulty to get funds for investment, said the analysts.
ICAB President AF Nesaruddin said the implementation of Tk 523,190 crore budget, which is 18 per cent higher than the revised budget of the outgoing fiscal, involves a lot of challenges.
The Institute of Chartered Accountants of Bangladesh (ICAB) and The Daily Star jointly organised the event where Planning Minister MA Mannan was present among others.
ICAB President AF Nesaruddin, its Council Member, former president Md Humayun Kabir and Associate Editor of The Daily Star Shahedul Anam Khan also spoke at the event.