Home ›› 28 May 2023 ›› Front
We urge the government not to increase VAT, customs duty, and income taxes in the FY24 budget, Metropolitan Chamber of Commerce and Industry (MCCI) President Md Saiful Islam tells The Business Post’s Rafikul Islam in an interview
As the government is going to announce the FY24 budget in June, what are your expectations from it?
The MCCI always emphasises budget management. If that is speedy and transparent, revenue increases as businesses become self-motivated to pay taxes.
The government reduced corporate taxes by 2.5 percentage points based on some conditions in the last fiscal year. But in the current situation, companies are not properly getting the benefits of the reduction due to various reasons.
The effective tax rate is high in Bangladesh. Disallowed expenses and tax deducted at source are high too. Public limited companies generally pay 20 per cent in corporate tax, but the total share goes up to 40-50 per cent because of different payments.
We want the existing customs duty, VAT, and income taxes to remain the same in the upcoming budget. Those should not be increased. During the ongoing crisis, we also expect the government will continue policy support as the prices of most products have gone up in the country.
The government is cautious about imports. What is your demand in this regard?
Except for luxury products, there is no obstacle to the import of other items as per the Bangladesh Bank directives. But the ground reality is that importers are in trouble due to the dollar crisis.
Because of the forex crisis, letter of credit (LC) payments are being hampered and those we import from are now reluctant to send products. As a result, our overall imports have come down. It is very bad for economic growth.
If manufacturers do not get raw materials, they cannot produce and supply finished products. On the other hand, if they do not get raw materials, they will have to import products, which will put a price burden on consumers.
This will impact inflation and the gross domestic product (GDP). The government restricting imports is not always encouraging.
We notice a downward trend in reserves, exports, and remittances. You are engaged in both import and export trade. What are your suggestions for increasing reserves?
Taka has been devalued by around 25 per cent in the current fiscal year. There will definitely be benefits in exports if taka is devalued. But we are not getting the full benefits due to high inflation, which has exceeded 9 per cent.
Utility and energy prices rose markedly alongside increasing shipping costs. But considering our production costs, we are not getting the right prices for our products from customers.
Exports and remittances have declined. However, we have development partners, such as the International Monetary Fund (IMF), the World Bank (WB), and the Asian Development Bank (ADB), to get budgetary support.
Bangladesh now has reserves of $29 billion, which increased after getting the IMF loan. Our development partners have been providing loans at low interest rates for a long time, which is very necessary for Bangladesh now.
If we observe our previous export situation, we can say it is impossible to achieve the FY23 target of $58 billion. However, we hope exports will increase at the beginning of the upcoming fiscal year. As we got some benefits due to taka’s devaluation, we can compete with other countries but there still is a mismatch.
We have lots of expats in different countries, but remittances have still gone down. The government should find out the actual reason behind that. Bangladeshis are living across the world, including countries in the European Union (EU). Our remittances must go up.
If our export is $58-60 billion and remittance is $25 billion in FY24, our total earnings would be $83-85 billion. At the beginning of the next fiscal year, Bangladesh’s economic growth will be higher than China and India, which has already been predicted by the IMF and the WB. We hope we can achieve that.
What are your suggestions for keeping inflation under control?
We have two types of commodities – imported and local. Soybean oil and sugar prices rose here as they became expensive in the international market.
When energy prices were hiked here, the prices of all types of products also went up. As a result, inflation increased. The government said energy prices would be adjusted if prices declined in the world market. If liquefied natural gas (LNG) and oil prices fall in the local market, the market will become stable.
We hope the government will reduce energy prices too by adjusting it with the international market. Commodity prices will then come down soon.
In the next budget, the government has targeted to keep inflation at 6.5 per cent. I think it can be kept under 7 per cent if utility and energy prices can be reined in.
What are your recommendations for formulating an investment-friendly budget in order to attract more investment?
There are some criteria for boosting investment, and those must be fulfilled. There is an impact on investment due to the ongoing dollar crisis. We do not expect more investment this year as it is the election year. But if the incumbent government continues its rule, there will be positive outcomes in investment.
All businesses want a stable situation for investment. Besides, infrastructure development will continue. A conducive environment is key to attracting more investment.
