Build a roadmap to implement new VAT law

The government will have to prepare a fresh roadmap for implementing the new VAT law to get the sixth instalment of a $1 billion IMF loan.
Necessary hardware along with VAT software will also have to be purchased by June next year to help a new VAT collection system take off.
The conditions were tagged after a team of the International Monetary Fund concluded a two-week review of reforms on Monday under the lender's Extended Credit Facility programme.
The IMF board may approve the next instalment -- around $140 million -- of the loan in November.
Finance ministry officials said the government has agreed to the conditions, but those will be finalised at a meeting in Washington next month on the sidelines of the World Bank-IMF annual meeting.
Though the government had earlier committed to the IMF that the new VAT law would come into effect in July 2015, later it was deferred by a year. The new roadmap will replace the existing schedule of implementing the law.
Due to opposition by influential ministers and the business community, the government had backtracked on implementing the new VAT law.
Meanwhile, the IMF in a statement said: "The introduction of a new value added tax, a key government reform to boost fiscal space for development spending, is facing delays."
The persistent revenue shortfalls relative to budget expectations reinforce the importance of pressing ahead with tax reforms, it said.
"Implementing the new VAT remains the foremost priority, as it has the potential to mobilise considerable additional resources, reduce compliance costs, and boost growth.

This should be complemented by reforms to strengthen revenue administration and automate data management and reporting procedures."
After a meeting with the IMF mission on September 24, the finance minister told reporters that the lender agreed to the revised plan. Now the National Board of Revenue will prepare the work plan, which will describe in details the various stages of the implementation process.
The IMF board in April 2012 approved around $1 billion for Bangladesh of which $704 million has already been released in five instalments. Before releasing each instalment, the IMF reviews progress of the reforms it suggests.
A finance ministry official said the main concern of the IMF mission was the implementation of the VAT law.
For the timely implementation of the law, the lender wanted to extend the ECF programme by one year, but the finance minister did not agree to the proposal.
The official said the IMF mission did not put any pressure on the government to hike petroleum prices. The two sides have an understanding that if the difference between local and international prices of petroleum products is more than Tk 10, the government will have to increase the price.
The IMF review found that the difference is within the range of Tk 10 now.