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World Bank To Help Bangladesh On VAT

by Mary Swire,, Hong Kong

15 May 2014

The World Bank Board has approved USD60m in interest-free credit to modernize the administration of Bangladesh's value-added tax regime and to boost the tax take.

The VAT Improvement Program Project will introduce automation, including the launch of online VAT taxpayer services, and improve transparency in VAT administration. The project aims to increase the ratio of VAT to gross domestic product (GDP) by at least one percentage point of GDP by 2019, from just 3.7 percent of GDP in 2012-13.

The project will support the government to implement the new VAT law, which comes into effect in 2015, and aims to provide better services and reduced administrative costs for taxpayers. A campaign will be launched to raise awareness of the need to register and file for VAT, and target an increase in VAT-registered businesses from 35,000 to 85,000 within the next five years.

"Improving Bangladesh's ability to raise tax revenue is critical for faster economic growth and overcoming poverty because the country needs more resources to invest in infrastructure and human development," said Johannes Zutt, World Bank Country Director for Bangladesh. "Compared to other countries in South Asia, Bangladesh's tax collection remains low. This project will improve taxpayer services, encourage better compliance and increase tax revenue by automating the VAT system."

The project will introduce modern business processes and Information Technology systems as well as a more transparent service-oriented tax administration. Registration, return processing, and tax payment will become possible online, reducing compliance costs for taxpayers.

The project will also support the VAT administration system to become fully compliant with Bangladesh's Right to Information Act. It will also introduce new business processes and a centralized processing center for efficiency gains, as well as improve the approach to tax audit and refunds.

The credits from the International Development Association (IDA) – the arm of the World Bank Group that helps the world's poorest countries – have a 40-year maturity period with a 10-year grace period, and carry a service charge of 0.75 percent.

TAGS: compliance | VAT tax authority guidance | VAT registration / deregistration | tax | business | value added tax (VAT) | VAT legislation | law | gross domestic product (GDP) | audit | tax authority | legislation | Bangladesh | services | VAT compliance matters

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