DHAKA: The Bangladeshi government will lose up to Tk10,000 crore for raising the VAT-free turnover limit and the highest threshold for turnover tax for businesses, according to an estimate of the National Board of Revenue.
The increase in threshold and withdrawal of restriction of items to avail the benefit of turnover tax will cause the loss, said Jahangir Hossain, member of VAT Policy of the NBR, at a roundtable on the new VAT law yesterday.
Bangla daily Prothom Alo and the NBR jointly organised the event at the newspaper’s office in Dhaka.
The estimate took into account the increase in VAT-free turnover ceiling to Tk36 lakh from Tk30 lakh and the highest threshold for turnover tax to Tk1.5 crore from Tk80 lakh.
The government also stands to lose Tk8,000 crore for a one-percentage point cut in the uniform VAT rate from 15 percent as envisaged in the new law, which has left businesses and consumers anxious of a rise in the price level because of the end of multiple rates.
The NBR however maintains that prices will not increase after the new law becomes effective from July 1 as businesses will get rebate, which is difficult to get now.
Domestic industries will also get protection under the new law, Hossain said, allaying the fears of small- and medium-sized enterprises and local industries, which are anticipating an erosion of competitiveness to imports.
Initially, the list of items for supplementary duty at the import stage was supposed to be condensed substantially under the new law, with only high-end products retained.
But now, it has been decided that the list will be the same as that under the VAT Act 1991, Hossain said. “There is no reason for businessmen to be worried. The level of protection that you enjoy now will not reduce.”
The government, at the prescription of the International Monetary Fund, framed the new law to boost revenue collection from domestic trade and economic activities by increasing compliance and curbing evasion.
Introduced in 1991, VAT is now the biggest source of revenue for the government, followed by the income tax and import duty.
Fahim said the government does not have enough capacity to protect the rights of consumers.
Citing a recent raid at a factory, he said such foray should not take place if the NBR wants to play the role of a facilitator. The imposition of the uniform VAT on rod from the current reduced rate will affect the construction and the real estate sector, which has been seeing sluggish demand, he added.
The increase in the prices of rod will not only affect home builders but also the economy as a whole, said Liakat Ali Bhuiyan, vice-president of the Real Estate & Housing Association of Bangladesh.
About the NBR’s claim of easy rebate, he presented the case of house painters, who work informally and do not issue receipts. “It will be difficult for home builders to claim rebates,” he added.
Towfiqul Islam Khan, research fellow of the Centre for Policy Dialogue, said ensuring the issuance of receipts will be very important for proper implementation of the law.
He suggested the NBR run awareness campaigns so that consumers can identify the receipts they are given to be genuine.
Consumers are afraid that the prices of gas, electricity and petroleum would rise because of the implementation of the new law, said Ghulam Rahman, president of the Consumers Association of Bangladesh.
Housing is one basic rights of a human and the hike in the price of rod will curtail the access to home ownership for a large number of low- and middle-income people, he added.
The raising of VAT-free turnover threshold and the ceiling for turnover will affect small and medium firms, said Ahsan H Mansur, executive director of the Policy Research Institute. “None will be interested in buying from them as sourcing from these firms will not ensure buyers’ credit.”
He criticised the plan to maintain the existing SD product list to protect local industries. “High levels of protection do not induce growth.”
Mansur suggested reduction of import duty on raw materials of rod to keep the prices lower.
The cost of doing business is high in Bangladesh, and one of the reasons is tax, said Syed Nasim Manzur, former president of the Metropolitan Chamber of Commerce and Industry.
He said the tax and revenue policy should be predictable and framed for the long-term so that investors can plan properly.
