Businessmen are angry with the decision to increase VAT again. VAT may vary on ready-made garments, AC restaurants, non-AC hotels, sweets and 43 types of goods and services. Businessmen say that this decision to increase VAT suddenly without discussion is ill-advised. This will reduce the purchasing power of the public and business will again be in crisis.
Tax
Finance adviser Salehuddin Ahmed said that the increase in VAT will not cause any major change in the price of goods. He informed that the duty on essential goods has been reduced, which will affect the prices.
In order to increase the revenue in the financial year 2024-25, the initiative of increasing VAT and other taxes has been taken by the interim government. VAT can reach 15 percent especially in case of readymade garments, AC restaurants, sweets and non-AC hotels.
Business leaders have also expressed concern that political pot changes and high inflation have directly affected business. They feel that before taking such an important decision, there should have been a discussion with the businessmen of the concerned sector. There is no need to take such a decision unless the country's political and economic stability is assured. VAT is a major means of revenue collection for the government. Currently, the number of VAT registered establishments is 5 lakh 25 thousand, out of which an average of 3.5 lakh establishments are paying VAT regularly. There are still millions of establishments that are not covered by VAT, and the National Board of Revenue (NBR) is unable to take effective measures to register them and collect VAT. As a result, there is a lack of necessary improvements, such as in setting up Electronic Fiscal Devices (EFDs).
Meanwhile, in the current financial year 2024-25, there is a shortfall in government revenue collection. NBR's revenue collection target is Tk 4 lakh 80 thousand crore, whereas till November only Tk 1 lakh 27 thousand crore has been collected against Tk 1 lakh 69 thousand crore. As a result, the revenue deficit is 42 thousand crore rupees.
Recently, the International Monetary Fund (IMF) proposed raising the VAT rate to 15 percent as a loan condition. IMF representatives visited Bangladesh last December before disbursing the fourth tranche of the USD 4.7 billion ongoing loan program to Bangladesh. Bangladesh requested an additional $750 million, which the IMF accepted. However, this requires adoption of revenue collection policy and fulfillment of some other strict conditions. Economists believe that the initiative to increase VAT has been taken due to this situation.
Chairman of Research and Policy Integration for Development (RAPID) Mohammad Abdur Razzak says, "There is no alternative for the government except to increase the revenue income. Raising direct taxes is difficult, so the government has taken the easy route of changing the VAT rate. If the situation is stable, the suffering of the people could have been reduced due to the increase in VAT.
The reason for traders' anger is that restaurants will now have to pay 15 per cent VAT on food bills, whereas earlier air-conditioned (AC) restaurants were subject to 5 per cent VAT.
The interim government has decided to increase the VAT rate by 15 percent. According to a Bangladesh Bureau of Statistics (BBS) survey, there were a total of 436,274 hotels and restaurants in the country in 2021, which has increased over the past three years, although exact figures are not available.
Expressing concern about VAT increase, Bangladesh Restaurant Owners Association Secretary General Imran Hasan said, "Restaurant owners are worried. If VAT is increased three times at once, it will have a serious impact on business. Besides, income tax will also increase. There is always pressure on those who do business according to the rules. Yes. In fact, efforts are being made to put traders on the path. If the VAT increase is not withdrawn, further steps may be taken in consultation with the members of the association.
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