The International Monetary Fund has said that the introduction of an improved value-added tax (VAT) regime in Bangladesh is facing delays, which could hold up the scheduled implementation of new legislation from 2015. The Fund has said that the introduction of the new regime should be the country’s key priority.
In 2013, value-added tax accounted for 37.5 percent of government revenues, but the nation’s tax-to-gross domestic product ratio is far behind other developing nations. The new law, which authorities aimed to have in place by 2015, aims to improve the tax-to-GDP ratio by providing better services and reducing administrative costs for taxpayers. Efforts are also to be launched to better educate taxpayers in the hopes of increasing the number of VAT-registered businesses from 35,000 to 85,000 within the first five years.
Emphasizing the importance of implementing the new VAT law in earnest, the IMF said: “The persistent revenue shortfalls relative to budget expectations reinforce the importance of pressing ahead with tax reforms. Implementing the new VAT remains the foremost priority, as it has the potential to mobilize 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.”
Bangladesh’s current value-added tax regime features a 15 percent rate. In 2013, Finance Minister Abul Maal Abdul Muhith said that the VAT reforms would substantially broaden the tax base and that the rate could be lowered within two years, to about ten percent, to improve the nation’s competitiveness.
– by Mary Swire, Tax-News.com, Hong Kong