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Towfiqul Islam Khan suggests NBR to impose VAT on gas and electricity in phases, not at a time

Published in Dhaka Tribune on Wednesday, 5 April 2017

Experts: New VAT law may trigger price hike of gas, electricity

Shariful Islam

New VAT law
National Board of Revenue holds a pre-budget discussion with the country’s economists on Tuesday

‘If the NBR imposes VAT on these utility services, they will have to make it clear to the consumers’

Consumers may see another round of hike in gas and electricity prices if the new value-added tax law comes into effect from July 1, the country’s economists warned.

“If the new VAT law comes into force, 15% VAT will be added to gas and electricity prices. It may push up the utility prices,” CPD Research Fellow Towfiqul Islam Khan said at a pre-budget discussion at the NBR headquarters on Tuesday.

He asked the National Board of Revenue to impose VAT on gas and electricity at the in phases, not at a time.

“The NBR has to make an announcement before imposing the VAT so that the business community can make their plan,” Towfiqul said.

Addressing the meeting, Prof Wahiduddin Mahmud, a leading economist, said the proposal of imposing 15% VAT on gas and electricity was not logical.

“If the NBR imposes VAT on these utility services, they will have to make it clear to the consumers,” he said.

The new law has drawn widespread criticisms as it will impose a flat 15% VAT on all sectors.

In 2012, the Parliament passed the law that emphasised using proper accounting method for all businesses.

The release of the last two instalments of International Monetary Fund’s Extended Credit Facility funds to Bangladesh were delayed as the government had failed to keep their commitment of launching the new VAT law by July 1, 2016.

Later, IMF provided the tranches after assurance by Bangladesh to implement the law by July 1, this year.

Moreover, the government is going to implement the new VAT law with to increase revenue collection.

The revenue earning target in the upcoming fiscal year’s budget will be Tk2,36,017 crore, which is a 16.18% higher than the current fiscal year’s, according to Finance Division sources.

Finance Minister AMA Muhith said the target is “achievable as the new value-added tax system will be strictly implemented.”

The national budget for the FY2017-18 will be placed in the Parliament on June 6.

NBR has increased the target of next fiscal year’s revenue earning to around Tk33,000 crore as the new VAT law has imposed a flat rate of 15% VAT.

The revenue collection target by the NBR for the FY2016-17 is Tk2,03,152 crore.

Addressing the discussion, State think-tank Bangladesh Institute of Development Studies (BIDS) senior research fellow Anwara Begum demanded gender-differentiate allocation in the next budget for women and children welfare.

Economist Mamun Rashid urged to remove cascading effect of tax on dividend and deduction from payment to contractor in the new VAT law.

NBR Chairman Md Nojibur Rahman presided over the meeting while NBR Member (VAT Policy) Jahangir Hossain and NBR Member (Tax Policy) Lutfor Rahman were present, among others.

Jahangir Hossain said, “The new VAT law is intended at ensuring better services to the taxpayers and increasing revenue collection with transparency and accountability in the process.”

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