Specific guidelines needed in the next budget for economic recovery
Staff reporter, Outlookbangla.com
Dhaka Chamber of Commerce & Industry (DCCI) in association with Samakal and Channel 24 organized a pre-budget discussion FY2021-22 on April 10, 2021 virtually to outline the needs in the key macroeconomic avenues and roadmap of trade, industrial, investment recovery as well as turnaround of private sector from pandemic adversities. Dr. Mashiur Rahman, Adviser to the Prime Minister on Economic Affairs and Chairperson, BRAC Dr. Hossain Zilllur Rahman joined the discussion as special guests. DCCI President Rizwan Rahman chaired and moderated the discussion.
The discussion meeting was divided into four sessions namely, (1) Financial Sector (2) Industry & Trade (3) Taxation & VAT and (4) Infrastructure (energy, logistics & health).
DCCI President Rizwan Rahman in his welcome address said that government will surely consider a business friendly, revenue friendly and industry friendly budget this year. And the budget will have a clear indication for the economic recovery amidst the pandemic time. He also hoped that the next budget will have especial attention to taxation and VAT policy, infrastructure, industry and trade as well as financial sector. He also said that if the government with the help of vibrant private sector work hand in hand Bangladesh will be able to recover its economic momentum despite the pandemic.
Dr. Mashiur Rahman, Adviser to the Prime Minister on Economic Affairs said that the growth should be inclusive. Economy needs to be widened all the resources should be utilized. For government, revenue target achieve without hampering economic activities is a priority. He also suggested stakeholders to arrange budget discussions all the year round. Regarding tax regime he said it should be a business friendly one. We should focus on increased revenue collection for development as well as needs to facilitate and incentivize businesses however, if revenue target is not achieved, development work will be halted down, he added. He also said that quality and safe investment will reduce default loans. A stable tax and duty regime for 7-10 years is a good move but all investors may not get this benefit as investments do not come at the same time. Our tax-GDP ratio is comparatively low because our tax elasticity is low in the country due to rebates in different levels. But, a social acceptance of tax, VAT, SD and Customs duty rate need to be in place having global standard. He also said that frequent changes in tax rate may hamper business growth rather he suggested gradually increase of tax mentioning a minimum time frame.
Chairperson of BRAC Dr. Hossain Zilllur Rahman said that the 2nd wave is going on and it may have a huge implication on the economy. The next budget should also have a plan of recovery as it was in the last year. Moreover, social protection should get major concern in the next budget, he added. Revenue collection and achieving the target is inevitable for a budget at the same time government must consider incentives for the pandemic-hit the businesses specially the CMSMEs. Disbursement of loan under stimulus for CMSMEs should be faster and in that case mobile financial services can be engaged as a delivery vehicle. For the growth trajectory, domestic market needs to be incentivized beside the export sector as the domestic economy will be a growth driver, Zillur Rahman said. We need a transition from cheap labour economy to skilled labour economy and a game changing policy review needs to be famed, he further added. We have to focus on health care sector and we need more skilled nurse. Urban poor are impacted heavily by the pandemic so budget needs an allocation as well as urban primary health care needs to be enhanced.
Stakeholders from various sectors took part in the discussion. Among them Senior Partner, KPMG, Adeeb Hossain Khan addressed the issue of withholding tax and high corporate tax rate. He also urged for a result oriented tax appeal system from the tribunal. Regarding VAT act he suggested to allow import rebate system. Member, Customs Policy & ICT, NBR Syed Golam Kibria said from customs revenue target is about 1 lakh core taka. The budget will have a priority on agriculture sector. We will also work on the trade facilitation agreement compliance, tariff rationalization, he said. NBR will examine the fiscal incentive on hybrid car import, he informed. Duty cut on import of freeze used for super shops will be considered, he said. Member, VAT, NBR Masud Sadik said at present our online vat return increased. We are focusing on automation of vat return. We had only 48,000 offline vat return and in future offline VAT return system may be stopped as online system ensures more transparency. Smart phone producers in Bangladesh enjoy only 0% to 5% tax. He also said that two organizations in Bangladesh are now producing dredger. In the new VAT law price declaration is not a mandatory however we need to widen the vat net, he added. Member, Tax Policy, Md. Alamgir Hossain said we are still facing Covid 19 pandemic. We all are fighting against it despite the growth is quite satisfactory. Government’s expenditure comes from revenue. At the same time government always tries to facilitate the businessmen. We need to strengthen our capital market as well as a strong bond market. We have different tax rates so the overall tax rate is 32.5% is not true as a whole. We are trying to reduce tax rate by widening tax net. It is more important to balance between achieving revenue target and ensuring business friendly environment.
CEO, IPDC, Mominul Islam urged for a long term bond market. Non-banking institutions are facing challenges now. He suggested to reduce corporate tax to 30% for NBFIs. Moreover he suggested for a 5-10 year term of duty structure for non-bank institutions. He also said that we have to ensure smart device for all for a cashless society. CEO, Standard Chartered Bangladesh, Naser Ezaz Bijoy strongly urged for easy access to finance to the SMEs. Incentives should be given for the export diversification. He also urged to reduce tax rate for NRB bond. Rahel Ahmed, CEO, Nagad suggested to incentivize the mobile financial services. There should be a micro merchant policy in the next budget. We have to increase smart phone penetration in the country. Asif Ibrahim, Chairman, Chittagong Stock Exchange Ltd. said corporate tax for listed and non-listed companies need to be slashed. We want to incentivize SMEs to come into stock market as well as we want foreign companies to come in the stock market, he told.
Kazi Inam Ahmed, President, Bangladesh Supermarket Association, said we have 300 super shops but there are 1500 super markets in Sri Lanka. We have to pay extra VAT of 5% which needs to be reviewed, he mentioned. VAT rate needs to be stabled. For super shops he claimed duty cut while importing capital machineries. Md. Fazlul Haque, Former President, BKMEA said there are a good number of leading green factories in Bangladesh. ETP should be must for any industry for environmental safety. But government may consider duty free access to the ETP machineries importers. Moreover green factories should get incentives. Budget should have a allocation for creating skilled work force. He also urged that the CMSMEs should get priority in terms of getting loan from the stimulus. Md. Jashim Uddin, Vice Chairman, Bengal Group of Industries said next budget should give incentives to the industry sector for employment generation. Moreover all the problems of tax, VAT, AIT, SD and Customs duty need to be solved. Besides, he urged for deduction of corporate tax for export oriented industries. He also urged for strengthening backward linkage industry. For the safety of local industries he suggested to impose antidumping and countervailing duty if needed. Dr. Md. Masudur Rahman, Chairman, SME Foundation said SMEs contribution to the economy is about 25%. 68% of stimulus which is 13,600 crore Taka has been disbursed to CMSMEs only. But all the SMEs did not get the benefits of this stimulus. SMEs create 80-85% employment. Due to pandemic salary of SMEs comes down 10%. Light engineering sector is a promising sector that has a market of 70,000 core taka but corporate tax for accessories industries is 32.5% that needs to be reduced. Jute producers get incentives while exporting but jute goods exporters do not get the same incentives, he said. He urged for backward and forward linkage readiness.
Md. Faizur Rahman, CEO and MD, United Hospital Ltd. said we have lack of confident in the health sector. Our local expertise did well in the pandemic time but what we need is good infrastructure. We need macro level planning in the health sector taking it as a priority sector like IT or RMG sector. We need 2.5 lakh doctors and 5 lakh nurses. PPP should be incentivized in the health sector, he added. We should have a serum institute of our own. He recommended to create a fund to implement mega health projects. He underscored the importance of backward linkage industry for the health sector and tax rebate. ASM Mainuddin Monem, President, Private Economic Zones Association of Bangladesh said infrastructure development is going on and it will take time. It is a long time investment. When all projects will be finished people will get its benefits. For the Economic zones, we need off-site infrastructure like power, energy, gas, road connectivity including all utility services. 21 districts will be connected by Padma bridge, he added. Professor of BUET and Energy expert Dr. Mohammad Tamim said energy linkages needed for 100 EZs including roads connectivity. For a rapid growth renewable energy cannot do it alone. Price predictability is must for businessmen, he said. He also urged for outlining a future demand forecasting. He suggested consideration over tax and VAT on LNG price in the next budget. Dependency on gas will increase, he said.
Abul Kasem Khan, Chairperson, BUILD said if we can create employment generation, additional tax rebate can be offered. He suggested to look into the matter of reducing effective tax rate that is sometimes 45-50%.
Acting Editor, Daily Samakal, Mustafiz Shafi in his concluding remarks said newspaper industry has to pay 37.5% corporate tax. The industry also pays 5% duty while importing newspaper. He thus wanted duty cut and reduction of corporate tax. He also thanked all for joining the event.