The International Monetary Fund (IMF) has called for reducing tax exemption in all the three sectors – income tax, value added tax (VAT) and customs. The tendency of tax exemption is high in Bangladesh as compared to other countries, according to the organisation. As a result, it is not possible to collected the targetted desired revenue.
IMF has asked for a list of the sectors with tax exemptions. At the same time, it has recommended reviewing the sectors which could be excluded from the list. The agency will provide the National Board of Revenue (NBR) with necessary assistance in this regard.
The delegates of IMF held separate meetings with the income tax, VAT and customs division of the NBR on Sunday. According to reliable sources relevant to these meetings, NBR members Masud Sadiq (customs policy), Shams Uddin Ahmed (income tax policy), Zakia Sultana (VAT policy) and Mainul Khan were present at these meetings, according to reliable sources.
These meetings were held at the NBR head office in the city’s Segunbagicha area. The five-member IMF delegation also paid a courtesy call on NBR chairman Abu Hena Md Rahamatul Munim after the meetings.
Regarding the tax exemption facilities at the meeting, the NBR officials informed the delegates that they have to provide this facility in several sectors for the growth of local industries. Different countries of the world also provide this facility. However, the tax exemption facility is being reduced gradually.
Meanwhile, the IMF delegates also held a meeting with the Financial Institutions Division at the finance ministry yesterday (Sunday). During the meeting, the IMF recommended reducing bureaucrats as directors on the boards of state-owned banks.
IMF questions tariff, duty
According to a reliable source, during the meetings with the top officials from each sector, the IMF delegation asked how the revenue collection would be increased amid this economic stress. In response, the officials of these three sectors presented a picture of the growth in realisation of revenue in the last three months. They said that if the current trend continues, there will be better growth in revenue collection this year than last year. Besides, several initiatives have been taken to increase the revenue collection, including widening the tax net.
According to the sources at the meeting, the IMF officials have suggested developing a five-year work plan to increase the direct tax or the income tax. They also stressed on automation and legislation of a new customs and income tax law. Besides, they asked when these new laws will take effect. The customs officials told them that the customs law is awaiting approval at the Jatiya Sangsad (national parliament). The lawmakers will decide when the law will be passed. On the other hand, the work on the legislation of the income tax law is under progress.
The IMF officials have suggested reducing the overall burden of tax. The customs officials have said the average import duty is around 14 per cent in the country at the moment. Overall, the average reservation rate of import duties is around 29 per cent, which is being reduced gradually.
Apart from that, the IMF also inquired about the steps taken for the reform of the VAT sector. The IMF has been informed that the rate of online vat return has increased exponentially. So far some 8,000 VAT machines have been installed. Besides, initiatives have been taken to install another 300,000 VAT machines which will result in an increased VAT realisation at one end and will reduce the amount of black money on the other.
Bureaucrats as directors
The board of directors of the state-owned banks are dominated by the former and serving bureaucrats. Therefore, it’s natural that they lack knowledge regarding banking policies and regulations, reviewing loan proposals and other related issues. The board of directors of state-owned banks used to be dominated by political personalities in the past. Their comprehension about the banking sector was even worse.
The visiting IMF delegation held a meeting with the Financial Institutions Division on Sunday. According to the sources in the meeting, the global financial agency has recommended appointing competent, professional and honest directors in the board of directors of the state-owned banks. The global financial agency objected about the members of the board of directors of the banks, they especially stressed on reducing the dominance of serving bureaucrats in the board.
The meeting was led by Sheikh Mohammad Salim Ullah, secretary of the Financial Institutions Divisions, on behalf of the government and Rahul Anand, Rahul Anand, IMF Mission Chief to Bangladesh, on behalf of the IMF.
However, when this correspondent went to the Financial Institutions Division after meeting for comments from Sheikh Mohammad Salim Ullah about the meeting, his personal secretary Shihab Uddin said the secretary had told him that it was a routine meeting and he won’t make any comment regarding the meeting.
Bureaucrats in different banks
Out of the nine members of the board of directors of the Agrani Bank except the managing director, three are serving bureaucrats. They are additional secretary of the Financial Institutions Division Mofiz Uddin Ahmed, Biswajit Bhattacharya Khokan, joint secretary of the Finance Division of Ministry of Finance and Economic Relations Division’s joint secretary Mohammad Masud Rana Chowdhury.
Md Ahsan Kibria Siddiqui, director general of prime minister’s office (PMO), Financial Institutions Division’s joint secretary Rukhsana Hasina and Finance Division’s joint secretary and personal secretary of the finance minister, Ferdous Alam are members of Rupali Bank’s board of directors. Apart from that, NBR member Matiur Rahman is in the Sonali Bank and there are four former additional secretaries in the Janata Bank.
The sources say, apart from raising questions about the bureaucrat-dependent boards, the IMF also has inquired about performance of the banking sector in recent times, risk management, the necessity of recapitalisation and the initiatives taken by the government to reform the financial sector.
Besides, the IMF has suggested developing strategy papers to reduce defaulted loans. They also sought updates on the legislation of five laws, including the bank company law and the bankruptcy law.
The Financial Institutions Division told them two of these five laws have got the approval of the cabinet. They said they would give due consideration to the recommendations by IMF.
Monetary policy statements four times a year
The IMF delegation also met with different divisions under the Bangladesh Bank (BB) Sunday. They asked for lifting ceiling on the interest rate, developing a strategy to reduce inflation and publishing monetary policy four times a year.
However, Bangladesh Bank has informed the delegation that although the BB has been publishing the monetary policy once a year up until now, it will publish twice a year from now on. The number of publications would be increased to four gradually.
The Bangladesh Bureau of Statistics (BBS) publishes the GDP estimates once a year at present. If it is published twice a year, it will be possible to publish the monetary policy more frequently.
BB has also said that although the inflation rate is between 9-10 per cent at the moment, it will decrease after the season of Aman harvesting. And the ceiling on interest rates will be withdrawn gradually.