IMF irked by slow VAT reforms

An International Monetary Fund team yesterday expressed dissatisfaction over sluggish progress in VAT reforms.

The IMF officials assigned to see progress in reforms in various areas against IMF's conditions under a three-year extended credit facility (ECF) met the National Board of Revenue.

The NBR said it would need another year to implement the VAT and Supplementary Duty Act 2012 due to re-tendering to procure software to build an integrated VAT administration system.

But the IMF team, reminding the tax authority of the government's commitment to make the law effective from July 1, 2015, hinted that the delay might affect timely execution of the ECF programmes, said a participant of the meeting.

The VAT law implementation was one of IMF's major conditions against release of the fund under the ECF scheme of $1 billion. The IMF has released about $704.3 million in five instalments. 

The IMF also wanted to know why the software procurement tender was cancelled.

Another official who also attended the meeting said NBR cancelled the tender in July, based on instructions from the cabinet committee on purchase.

NBR also informed the team that implementation of the VAT law, which will replace the existing law, is likely to be delayed further as some provisions need to be reviewed as demanded by business leaders.

The business community came down hard on the government as their recommendations were ignored during the drafting of the law.

The Federation of Bangladesh Chambers of Commerce and Industry said it would be difficult for businesses to comply with various provisions of the new law.

FBCCI questioned the practice of framing a new law without an impact assessment. The new VAT law stipulates a flat 15 percent rate for all areas.

The government had earlier taken up a Tk 551.52 crore project to implement the new VAT law. Of the amount, the World Bank will provide $60 million (about Tk 470 crore) as interest-free credit to help modernise VAT administration and increase tax revenue.