Budget

Indirect Taxes

VALUE ADDED TAX AND SUPPLEMENTARY DUTY

Mr. Speaker,

26. The Value Added Tax System was introduced in
1991. To begin with, it was limited only to import and manufacturing stages. Services, supplies and retail sales were brought under the VAT system in phases. As a result, the contribution of VAT to the national revenue earning has gradually been increasing.

Mr. Speaker,

27. The Revenue Reforms Commission and various organizations recommended that the VAT system be expanded. Taking their recommendations and the prevailing reality into consideration, I propose to impose VAT on the services rendered by Amusement and Theme Parks, Picnic Spots, House

Cleaning and Maintenance Agencies, Lease-Finan Institutions, Express Mail Service Providers, Film Distribu Commercial Building and Apartment Builders, upper g Tailoring Shops of Dhaka and Chittagong. Holding va' social events and the serving of food in the community ce:
has become very popular in the country. If such events are in hotels, VAT is leviable but if held in a community c' there is no VAT. To remove this discrepancy, I propo~ impose VAT also on food served in community centres. Tb of goods and services on which VAT is proposed to be imp appears at (Annexe-'CD.

Mr. Speaker,

28. The existing rates of supplementary duty cigarettes are very high. The present government discoui smoking. With a view to discourage smoking, as well increase revenue collection, I therefore propose to restru the rates of supplementary duty on cigarettes. (Annexe- C

Mr. Speaker,

29. Value Added Tax levied on insurance premium~ shipping bills of 100% export-oriented ready-made garr industries, as well as on commission paid to the Clearin~ Forwarding Agents by such industries is refunded. It ta] long time to get the refund. I therefore propose to with collection of VAT from insurance~ shipping bill and agent's commission relating to 100% export-oriented indu including ready-made garments industries at source.

30. To encourage payment of VAT, I propose to introduce rewards for the highest VAT paying businesses and establishments of each of the district.

Mr. Speaker,

31. At present, the Spinning and Weaving Industries are under Excise Duty. I propose to bring them under VAT and, at the same time, withdraw Excise Duty leviable on their products. Along with this I propose to bring the existing Domestic Air Ticket Tax under Excise.

Mr. Speaker,

32. To streamline the Value Added Tax system, I propose to impose VAT on certain products at import and/or manufacturing stages while I propose to withdraw VAT from certain products at manufacturing stage. Besides, I propose to levy Supplementary Duty on certain products at import and manufacturing stages. The proposals appear at (Annexe-' C').

Mr. Speaker,

33. With a view to making the VAT administration more dynamic & coherent and also to make VAT laws, rules and procedure easy to comply and enforce, proposals for amendments of VAT Act and the rules have been incorporated in the Finance Bill. In order to make the system and procedure for payment of VAT comfortable for the tax payers' and also to provide them with better services, a Large Tax Payers Unit,

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similar to the one in Income Tax department, will be set-up for VAT as well.

Mr. Speaker,

34. To give effect to the proposals I have made so far relating to Income Tax, Customs Duty, Supplementary Duty and Value added Tax, a number of provisions of the Income Tax Ordinance, 1984, the Customs Act, 1969, the Value Added Tax Act, 1991 and the Travel Tax Act, 2003, and also the Rules framed thereunder need amendment. To that end, I am going to place before this Parliament the Finance Bill, 2004, following my speech. Besides, a number of Statutory Notifications will be issued to make the proposals effective. The list of such notifications appears at Annexe-'C'.

Mr. Speaker,

35. I have so far spoken about the proposals, the steps to be taken and the procedures followed for the collection of revenues during the fiscal year 2004-2005 Now I intend to present, in brief, an overall significance of the proposals.

36. For the FY 2003-2004, we set a revenue target of 27,750 crore taka for Income Tax, Value Added Tax (VAT), Customs Duty and Other Taxes. As mentioned before, global instability and non-economic internal impediments have adversely affected the overall revenue collection of the country. Even then, the revenue collection in the fiscal year 2003-2004 will be about 17% more than that of fiscal year 2002-2003 .The total tax revenue target set for the next fiscal year 2004-2005 is

32,190 crore taka. Compared to the expected collection of revenue during 2003-2004, the target for 2004-2005 shows a growth of 19%. This is certainly a challenging target.

Mr. Speaker,

37. I have already mentioned, in the budget proposals, about the efforts that we made to increase the flow of internal resources. In the next fiscal year, internal resources will account for 53% of the total outlay of the Annual Development Programme (ADP). In future, we have to increase the proportion of our domestic resources in development financing in fulfillment of our election pledge to accelerate economic development. We have to implement the PRSP programme for poverty alleviation, develop human resources and increase efficiency in macro economic management for attaining Millennium Development Goal. Special care has been taken to ensure unhindered growth of agriculture and industry. While reducing the highest rate of customs duty, we are not imposing any new taxes. We therefore have adopted a strategy for expansion of tax base, simplification and rationalization of tax system, increased transparency and efficiency in revenue administration, creation of a Central Intelligence Cell in the NBR, decentralization of revenue administration, reduction of the discretionary powers of tax officials and increase in manpower to boost up revenue collection, In conjunction with the efficient application of Information Technology (IT), effective steps for strengthening monitoring activities have been taken to prevent tax-evasion.

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Mr. Speaker,

38. Although there is a possibility of decline in t import revenue owing to reduction of customs duty in t process of trade liberalization in consequent to the on-gd globalization process, overall revenue earning will increase d to restructuring and rationalization of customs dui supplementary and income tax rates, normal import growth a expansion of income tax and VAT net, and above all due tc number of administrative measures. Although the reven target of 32,190 crore taka set for the next fiscal year is challenging one, I am hopeful, it can be achieved with
rational restructuring of customs duty and other taxes, a reforms of tax administration and management.

Mr. Speaker,

39. Shahid President Ziaur Rahman, during his tenu started the works of building a prosperous and self-reliE Bangladesh. We have to make all-out efforts to accomplish unfinished tasks left behind by him, The alliance governm~ under the able and far-sighted leadership of the Hon'ble Prit Minister, Begum Khaleda Zia, has been working untiringly attain that goal. Despite our having differences of opinion, have the same cherished goal of national development a economic emancipation. In a country where the vast majority people live in rural areas under the burden of pover generation of rural employment and alleviation of rural pove is the driving philosophy of the country's development strate~ We shall have to devote ourselves, applying our wisdo intellect and intrinsic worth, to the welfare of the comm people of the country irrespective of our political affiliation. ~

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have to devise our own development strategy and implement that by avoiding negative political activities, and preventing corruption, wastefulness and extravagance. It is my firm conviction that we can build a modem and prosperous Bangladesh by our honesty, sacrifice and healthy politics, rising above personal interests and temporary political gains. Inspired by the democratic values and by showing respect and tolerance to others' opinion, let us work unitedly to raise the standard of life of the common people. Let Almighty Allah help us in our mission.

Allah Hafez
Bangladesh Zindabad

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