Leading business associations yesterday lauded the government’s proposed budgetary measures, but pointed out that implementing those would be a major challenge.
The reaction came a day after Finance Minister AHM Mustafa Kamal proposed the Tk 6,03,680 crore national budget, offering a cut of 2.5 percentage points in corporate taxes for listed and non-listed companies and tax exemptions for several sectors to stimulate investment in manufacturing.
In its reaction, the Metropolitan Chamber of Commerce and Industry (MCCI) said the proposed budget for the next fiscal year 2021-22 was courageous and forward-looking in many aspects, but its proper implementation would face major challenges.
The budget focuses on health, agriculture, human resources, rural development, job creation, and continuation of the stimulus packages, it said in a statement, adding that these steps were commendable.
However, the major challenges in proper implementation and ensuring the quality of public spending must be addressed if the nation is to obtain the full benefits of the proposed budgetary allocations and incentives, it said.
The MCCI said the upcoming fiscal year might be one of the most challenging years from the perspective of fiscal management due to the economic slowdown caused by the Covid-19 pandemic.
“Revenue mobilisation will be a daunting task,” said MCCI President Nihad Kabir in the statement.
Besides, the budget has not indicated any specific reform and restructuring of the tax policy and tax administration to enhance associated capacities and deliver the right kind of public services, which in turn will increase revenue collection without overburdening the compliant taxpayers.
The MCCI suggested adopting an interim evaluation system for the budget every three months for the next year so that, if required, it could be restructured and revised accordingly.
“As there are still so many unknowns to be dealt with regarding the pandemic and its ongoing effect on society and economy, the need of the hour is flexibility to deal with situations and requirements swiftly as they arise,” she said.
The MCCI urged the government to utilise all available channels to pursue all the different lower-cost sources of funding being made available internationally in order to reduce the pressure on domestic resource mobilisation.
It, however, opposed the plan to increase the corporate tax rate for mobile financial service (MFS) providers, citing that the sector was at a nascent stage of development in Bangladesh.
Increasing their tax rate steeply during the pandemic will cause a slowdown of the growth of the MFS services and send a wrong signal to investors and users alike amidst all the positive signals of the budget, said the MCCI.
The Foreign Investors’ Chamber of Commerce & Industry (FICCI) lauded the move to reduce corporate taxes and tax exemptions for agro processing and IT related industries.
“The chamber also highly appreciates the government’s plan to vaccinate 80 per cent of the population in phases against the novel coronavirus,” it said.
The FICCI, however, said it would have been happier had the government withdrawn the 2 percent minimum tax on telecom, 1 percent on tobacco, 0.25 percent on individuals and 0.6 percent on others.
The Bangladesh Chamber of Industries said the private sector would benefit from the tax reductions and exemptions.
It urged the government to continue reducing the corporate tax rate in the next three fiscal years.
Bangladesh Frozen Foods Exporters Association (BFFEA) demanded a reduction of source tax on export of frozen shrimp and other fish to 0.25 percent from the present 0.50 percent. It demanded that the tax authority end taxation of the sector at the source tax deduction.
The BFFEA also urged the government to increase the cash incentive on export of frozen shrimp to 20 percent from 10 percent and incentive on export of other fish to 10 percent from 5 percent.
In a separate statement, Business Initiative Leading Development said the budget seems to have done well in addressing the current situation and is forward-looking, considering the “Made in Bangladesh” concept.
This will not only help businesses to diversify but also pave the way for the country’s graduation from least developed to a developing country, it said.