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New VAT law under fire from business leaders
September, 11th 2014

Businessmen yesterday came down hard on the government for ignoring their recommendations and concerns when drafting in the VAT and Supplementary Duty Law 2012.

In the face of protest, Finance Minister AMA Muhith announced that a committee with a representative from private sector as co-chairman will be formed to make a report on the law. Based on the report, the government will take steps, he said.

“It is surprising that even after so much consultation and discussions the law is not good enough for you and that have decided to take a stand against it,” he said at a discussion on the law.

Commerce Minister Tofail Ahmed, Food Minister Md Qamrul Islam and Prime Minister's Economic Affairs Adviser Mashiur Rahman attended the discussion organised by the National Board of Revenue in response to the opposition from the country's apex trade body against the new law.

The contentious VAT and SD Act 2012, which stipulates a flat 15 percent VAT, is scheduled to take effect from July 1 next year. Package VAT—VAT determined on a truncated basis and tariff value system—would be done away with.

The Federation of Bangladesh Chambers of Commerce and Industry said it would be tough for businesses to comply with various provisions of the new law.
A new VAT law was not necessary as businessmen have become accustomed with the existing one, passed in 1991, it said, adding that provisions could have been incorporated by revising the existing law.

FBCCI President Kazi Akram Uddin Ahmed said the trade body in a meeting in 2009 on the draft law voiced out its concerns about framing a new legislation without impact assessment study.

But Muhith went on to instruct the NBR to finalise the draft based on discussions with the private sector. “There were several meetings since. We were given hope after consensus on several issues with the prime minister's economic adviser and chairman of the parliamentary standing committee on finance ministry. But those issues were not reflected in the law,” Ahmed said.

“There would have been no need to sit today if the issues sensitive to the private sector were taken into consideration.”

Ahmed said the withdrawal of package VAT system has created resentment and fear among the business community.

“It would be impossible for businesses to comply with the provision of paying 15 percent VAT,” he said, while citing China, Japan and India as examples where VAT determined on truncated base is still present.

Annisul Huq, a former FBCCI president, said there were 20 sittings with businessmen and various committees of the government on the draft VAT law.

In addition, the FBCCI also raised its views at consultative committee meetings ahead of framing of national budget. The apex trade body also sent nine letters to the government in 2012 raising its concerns about the VAT law.

“There was no need for today's meeting had the proposals of businesses were reflected in the law. The businessmen have not decided on a whim that they would not comply with the new law,” Huq said.

Meanwhile, the commerce minister said the largely compliant industries may not be affected. “But the emerging businesses might fall into trouble. So, we should be careful in executing the new law,” Ahmed said.

In his speech, Muhith said he felt the level of acceptance among the businessmen is very low, but then again there was opposition from businesses against the VAT Act 1991 as well.

“The new law is a good one if you maintain accounts properly and with honesty -- you will not get into problems with the state. You do not have to maintain two accounts in the new law.”

Muhith turned down the FBCCI's pleas to continue with the existing law, as the present one had undergone a lot of revisions and has become difficult for a common man to understand.

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