This operation will support the VATImprovement Program to assist the National Board of Revenue(NBR) in streamlining and modernizing Value Added Tax (VAT)operations and establishing an integrated VAT ManagementSystem for the purposes of implementing the new regime. Theprimary focus of the program is to prepare theadministration to be able to administer the new VAT, whichis to be introduced in July 2015. The new VAT Act, 2012provides for a modern VAT scheme based on few exemptions andself-assessment.The Act provides the legal basis for thenew VAT administration, and the impetus for a shift frommanual to automated and modernized core tax businessprocessing. The program is part of the government s broadertax reform agenda as articulated in the Tax ModernizationPlan 2011-16 (endorsed by Parliament in June 2011), whichenvisages policy and institutional reform alongside aprogram for automating NBR operations to improve services totaxpayers, reduce administrative costs for taxpayers, andimprove compliance. The VAT improvement program aims towiden the tax base by enhancing voluntary compliance, andreducing non-compliance. The ultimate goals are to increaseVAT revenues and enhance the transparency of the VATadministration in Bangladesh in order to achieve itsmedium-term revenue target of a tax-to GDP-ratio of 12.2percent by FY 2016; and to enhance the VAT compliance.Towards this objective, the program will also address thosestructural weaknesses embedded in the tax system that resultin skewed tax bases and provide wide opportunities forevasion and corruption.Importantly, the VAT improvementprogram will support the strategic reform agenda, alsosupported by the IMF s Extended Credit Facility to enableNBR to fully implement the new VAT law.
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