A World Bank mission is expected to visit Dhaka next week to assess the progress in digitisation and modernisation of the VAT system in light of the government move to shelve the implementation of the new law for two years.

The team will also assess the implications for deferred implementation of the much-talked-about law that seeks to impose a uniform 15 percent VAT across the board, doing away with the multiple VAT rates under the existing VAT Act 1991.

The mission led by Raul Felix Junquera Varela, the Washington-based lender's lead public sector specialist and global lead on domestic revenue mobilisation, is expected to meet with the senior officials of the National Board of Revenue and the economic relations division.

The team will hold meetings between July 16 and July 20 to assess the situation.

Officials said the appraisal by the mission would be instrumental in the WB's future financing for the VAT Online Project, which was taken by the government to improve revenue mobilisation and transparency in the VAT administration.

The multilateral lender in May 2014 approved $60 million interest-free credit to help modernise Bangladesh's VAT administration system and increase tax revenue.

The project aims to increase the VAT-GDP ratio to 4.7 percent by June 30, 2020 from 3.7 percent in March 2014.

It is also aiming for: operational modernisation of the VAT wing to increase voluntary compliance, introduction of an integrated VAT management system, institutional strengthening and capacity building.

A senior official of the NBR said it is a routine visit from the WB to assess the overall situation.

But the appraisal by the mission will be important following the postponement of the new VAT law from this month.  

Until February, Tk 122 crore has been spent on the project, according to a finance ministry document.

The multilateral lender until July disbursed $20 million for automation and modernisation of the VAT system against the overall expenditure for the project by the government, which is about $18 million, according to the NBR official.

“It appears that the remaining funding from the WB will depend largely on the assessment by the team,” he added.

At the prescription of the International Monetary Fund and to fulfil the conditions of its $1 billion Extended Credit Facility loan, the government in 2012 framed the new VAT law, but it changed the deadline twice for enforcing the legislation. The last deadline was July 2017.

But the government, at the eleventh hour, shelved the bid in the face of opposition from businesses and lobby groups and a fear of inflationary spiral, and decided to continue with the existing VAT Act 1991.

Until yesterday, 41,081 businesses signed up online for the 9-digit Business Identification Number. Of those, 25,679 have re-registered and 15,402 got fresh BINs to run their business, according to the NBR.