DHAKA: The International Monetary Fund (IMF) has welcomed progress towards the implementation of a new value-added tax (VAT) code in Bangladesh, a key reform being undertaken as part of a three-year IMF financial assistance program.

On the conclusion of a two-week-long mission to the nation on October 6, 2013, the head of the IMF delegation Rodrigo Cubero noted that authorities remain committed to a budget deficit of 4.3 percent of gross domestic product in the fiscal year 2014, with fiscal consolidation measures centered on tackling non-compliance rather than hiking rates.

Cubero reported: "There has been significant progress on structural reforms. The new value-added tax law has moved to the implementation phase."

The Fund highlighted the importance of preparing robust frameworks for tax administration to ensure the full impact of the new VAT law is achieved. According to Bangladesh`s Finance Minister, Abul Maal Abdul Muhith, speaking in July, the revamped legislative framework will significantly boost the efficacy of the nation`s VAT regime potentially enabling the Government to cut the headline rate considerably within two years.

He said that the standard value-added tax rate of 15 percent, in place since 1991, seems high, and that a rate as low as 10 percent could be introduced to create a more conducive tax environment to support the nation`s development.

The Government hopes to establish income tax as the greatest source of government revenues over the next few years. Presently value-added tax accounts for around 37.5 percent of government revenues, up from 29 percent in the fiscal year 2001/2, and 15 percent in 1991.

Source: tax-news.com
BDST: 1051HRS, OCT 01, 2013
RS/BSK