IMF Advises on VAT, Is a Discredited Policy

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Dhaka, 29th December 2011. Today Equity and Justice Working Group (EquityBD) an alliance of right based civil society organization in a press conference in national press club, termed the recent International Monitory Fund (IMF)’s conditionality to government for approving new Value Added Tax (VAT) expansion law as a discredited policy, they also mentioned that, in most cases VAT hearts poor and small or local level economic activities. They urged government for a pro poor and integrated resource mobilization in this regard. The press conference was moderated by Rezaul Karim Chowdhury, Chief Moderator, EquityBD; welcome statement given by Mostafa Kamal Akanda, Coordinator, EquityBD; written statement has been read out by Syed Aminul Haque, Secretariat Coordinator, EwuityBD; all of them including Mujibul Haque Munir, Researcher, EquityBD has been participated in the question and answers sessions.

In written statement EquityBD mentioned that, IMF has advises such a policy in most of African countries, but there are studies that the policy has failed to generate expected level of GDP tax ratio, and which has in fact degenerated the income of the poor segment of population. They also mentioned that IMF hardly sees corporate income tax, personal income tax and unveiling of black economic activities as a major source of revenue mobilization. As because IMF want market liberalization and expansion of multi notational companies in developing countries. At present in Bangladesh VAT contribution in revenue mobilization is about 39 %, where as corporate and personal income tax contribution is 26 %.

In the developed countries like New Zeland VAT rate is 12 % whereas in new VAT expansion law is proposing single rate of 15 %, which is highest among other South and South East Asian countries, e.g., in Singapore 5 %, Thailand 7 %, in Indonesia, Myanmar and in Vietnam it is 10 %, and in Nepal 13 %. In developed countries contribution of direct tax like personal and corporate income tax is around 70 to 80 %.

The group urged for open and mass level debate on new VAT law and also urged for a pro poor and integrated revenue mobilization policy as the all country’s development financing ultimately should come from its own revenue mobilization.

Please Download [English Press] [Position paper_English] [Bangla Position Paper] [Presentation]
IMF Country Report Bangladesh November, 2011 [Download]
IMF Revenue Mobilization in Developing Countries [Download]
Distributional Impact VAT reform in Phillipine IMF Working Paper [Download]
Impact of IMF tax policy in sub-Saharan Africa [Download]
IMF advice on VAT Regressive BWP [Download]
Life line or Death Kenll what IMF offer [Download]
IMF Role of Policy Conditionality & Criticism [Download]

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