IMF suggests NBR to adopt new VAT law soon

Express (September 04, 2011)

The International Monetary Fund (IMF) has suggested the National Board of Revenue (NBR) to make the proposed VAT law effective without any delay to help prevent revenue leakage.

The multilateral lender recently sent a letter to the revenue board chief, expressing its optimism about speedy adoption of the law, officials said.

The IMF has long been suggesting the government to introduce a new VAT law replacing the existing one.

Earlier, the move to introduce the new VAT law faced blow, following an observation of the Prime Minister on its effect on local industries.

The country's apex chamber leaders are strongly opposed to some of the provisions of the draft VAT law. They met the PM and requested her not to introduce the new law and amend the existing one.

The IMF, in the letter to the revenue board chief, said it hopes the NBR would be able to finalise the draft of the new VAT law by December 2011. It also underscored the need for introducing a direct tax act for the income tax wing.

Officials said the multilateral development partner has expressed its willingness to provide technical assistance and training to the NBR in this connection.

Talking to the FE, the NBR chairman Dr Nasiruddin Ahmed said the revenue board has already incorporated a number of new measures in the existing VAT law.

He said the development partners have inquired about the latest status of the proposed VAT law several times.

Another official of the VAT department said the draft VAT law preparing team did not stop or suspend their work, although the draft law faced several roadblocks earlier.

In November 2009 the government formed a committee, led by economist Dr Ahsan H Mansur, and it had a plan to introduce the law from the current fiscal.

The committee suddenly stopped working for reasons hitherto unknown. Officials said recommendations of the committee faced opposition both from tax officials and businessmen.

Following repeated suggestions from the IMF, the NBR formed another committee, comprising senior VAT officials and chamber leaders, for preparing the draft VAT law. However, it again faced strong opposition from the businessmen.

The officials said the proposed withdrawal of reduced VAT rates for small and medium businesses in the draft VAT law sparked strong criticism, mainly coming from the businessmen.