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VAT is Regressive to Poor

VAT is Regressive to Poor, Emphasize Direct Tax for Domestic Resource Mobilization

Dhaka, 15th September 2012. Today in a seminar held in national press club organized by EquityBD a civil society network of right groups in Bangladesh, and other policy makers has criticize IMF (International Monetary Fund) for pursuing discredited tax policy in Bangladesh. They urged government to reconsider new VAT (Value Added Tax) law 2012, which has been prepared to fullfil of IMF conditionality and which supposed to be passed in present parliament session. Civil society urged that, VAT is regressive to poor, and in respect of tax policy there should be emphasize on direct tax.

The seminar title “Revised VAT law 2012 to fulfill IMF Conditionality, a Review : Domestic Resource Mobilization, VAT and Tax Justice” was moderated by Rezaul Karim Chowdhury of EquityBD, welcome address was given by Mostafa Kamal Akanda of EquityBD, key note presentation was given by Ahsanul Karim and Syed Aminul Haque of EquityBD. Key speakers of the seminar were, Saha Zikrul Ahmed, Member of Parliament and President Bangladesh Tax Law Association; Dr. Abu Ahmed of Dhaka University; Kawsar Rahman, Chief Reporter, Daily Janakanta; Dr. Romoni Mohan Debnath, Economist and Columnist; Zakir Hossion Kahan of TIB (Transparency International Bangladesh); SM Badrul Alam of Bangladesh Krishok Federation; Aminur Rasul Babul of Unnayan Dhara; Mahbub Hasan of Coastal Development Partnership; and Ahmed Swapan of VOICE.

In the key note presentation EquityBD has mentioned that, key difference in 1991 and VAT law 2012 is that, present law has a definition to cover all items related to consumption, which has the danger to imposing VAT on poor on their essential commodities. EquityBD has demand to differentiate the definition, especially to keep essential commodities out of present law. At present it is 37.30 % internal resource from VAT, where in developed country like in Newzeland it is only 12 %. It has referred to a research that IMF did the same thing in African countries, but in fact it was not bring the expected tax GDP ration, they have cited an research case study from South Africa that, while higher income groups pay only 7 %, poor families has to pay 10 %. It has also shown a figure in Bangladesh richest families only paying 10 %, while poor families paying 20 % in VAT.

Dr. Abu Ahmed said that VAT is regressive to poor, he urged to follow more equitable and less burden some tax policies. Kawsar Rahamn mentioned that there are 22000 people who have assets of more than taka one corore, but only 1000 people pay tax more than taka 1 lac, all these people have to be brought in tax net. Mahbub Hasan mentioned, 5 % population own 40 % of the country resource, but only 8 lac people pay tax, so there should be scope of expansion of tax net, government should not embark on VAT which is easy to impose and collect. Zakir Hossain Khan urged government and NBR (National Board of Revenue) to do research on impact of different tax policies, now which is being driven by research of World Bank and IMF, he also urged to reactivate Tax Investigation unit of NBR. Dr. Romoni Mohon Debnath said that present tax policy is not in favor increasing savings of the nation, he also mentioned that, society is being driven by unregulated market force, and which is the main cause of all economic and social disorder. Saha Zikrul MP said that Finance Ministry of the country has always been run by non political person, this non political people hardly understand peoples perception. He also expressed his concern against the anti poor and regressive nature of VAT.

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