Failure to implement VAT-SD act to affect revenue earnings: CPD
BSS
The Centre for Policy Dialogue (CPD) said yesterday (Monday) that the governments inability to implement the new Value Added Tax (VAT) and Supplementary Duty (SD) Act would seriously impact the fiscal framework, especially revenue mobilisation.
Lack of necessary preparation, lack of political consensus, and failure to realise the social impact of the new law are the main reasons for the failure to implement the new VAT and SD Act, said the distinguished CPD fellow Dr Debapriya Bhattacharya.
He made a presentation at a press briefing on the post-approval observations on the National Budget for FY 2017-18 at the BRAC Centre.
The meeting, moderated by CPD executive director Dr Fahmida Khatun, was also addressed by distinguished fellow Prof. Mustafizur Rahman and research director Dr Golam Moazzem.
Revenue mobilisation will be significantly lower, but, at the same time, public expenditure will also be low enough to offset any possible impact on the budget deficit, the CPD observed.
Responding to a question, Dr Bhattacharya said the government would have to introduce financial sector reforms, as the country was moving towards acquiring a developing status. He said the government would face a shortfall of Tk. 43,000 to Tk. 55,000 crore compared to the target in this fiscal year. But he did not state the extent of shortfall that was expected to arise due to non-implementation of the new VAT and SD Act.
According to CPD estimates, VAT and SD collection at the import stage should not be affected by any significant margin (around 1% less), but VAT collection at the domestic stage will be the most affected as truncated rates are to continue (mostly in services). Besides, VAT and SD revenue generation from direct taxes along with non-NBR sources would be critical, the CPD observed.
The CPD suggested consideration of three objectives maintenance of macroeconomic stability, giving support to private investment and enhancement of the employment impact of growth for implementing the budget for FY 18.
Addressing the briefing, Dr Bhattacharya said the CPD supported the new VAT and SD Act.
The government could have implemented the new law if it went for a 12 per cent uniform VAT rate, he noted. The CPD also said that firms deriving benefits from a non-uniform VAT rate would face problems. Besides, persons involved in revenue collection have been taking illegal advantage for a long time.
