Emphasize Direct Tax, VAT is Regressive

EquityBD NGO News Desk :: (Dhaka, 16th July 2013) Today in a press conference held at National Press Club eight right based civil society networks criticize value added tax (VAT) as it is regressive especially to the poor and middle class consumers. They urge the government to emphasize on corporate and direct tax and elimination of corruption in VAT collection procedure in the country.

Mr. Rezaul Karim Chowdhury of EquityBD moderates the press conference while the other speakers are Prodip K Roy of Online Knowledge Society, Jibanananda Joyanta of Surakkha O Agrogoti Foundation, Mejbah Uddin Ahmed of Jatiya Sromik Jote and Mostafa Kamal Akanda of EquityBD. Other participating organizations are Unnayan Dhara Trust, Voice and Development Synergy Institute.

Syed Aminul Haque of EquityBD reads out the group’s position paper where it is alleged that there are huge corruption in VAT collection in depositing to government. The national and international companies are involved in this, as there is no foreign and multinational companies are not in the top list as VAT depositor. The contribution of VAT and other indirect taxes in internal revenue of Bangladesh is about 70% while direct taxes are only 30% whereas the scenario in the developed countries is just opposite to it.  Even in neighboring India the contribution of direct tax is 33% and in Sri Lanka it is 31%. The government of Bangladesh enhances VAT rate up to 15% while in Singapore it is just 5%, in Thailand 7%, in South Korea 10% and in New Zealand 12%. The conditionality of IMF (International Monetary Fund) ties up Bangladesh to impose VAT even on essential goods (e.g. rice, pulse and oil) and in essential services like health and education. He also mentions that ultimately it is the common people as consumers who are mostly poor have to take the brunt of VAT.

Rezaul Karim Chowdhury of EquityBD mentions that according to Bangladesh Bank statistics, there are about 28,000 personal bank accounts that have money more than Tk. 1 crore but there are only a thousand people who give income tax more than one hundred thousand Taka. He says, Government must emphasize on personal income tax and corporate tax.

Mr. Chowdhury says, around 60 to 80% of the national economy is the underground economy, which should brought under law and order. It should be noted that only 23% is the underground economy in neighboring country India. VAT collection is easier that’s why IMF emphasizes on this, but they never consider that it is unequal and injustice on common people.

Prodip K Roy says, almost all of the common people pay around minimum taka 50 per day as VAT while they consumes essential products.

Jibanondo Joyanta mentions, there are massive corruptions in VAT collection and its depositing only because of less availability of electronic machines. In fact, the tax officials and corporate people are the beneficiaries of these corruptions. He adds, companies like Unilever and GrameenPhone should be in the top of the list of VAT depositors in Bangladesh but they are not. He urges to eliminate VAT from essential services and goods.

Mejabah Uddin Ahmed mentions, there are a lot of sweet-shops who only do VAT selling business instead of selling sweets.

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