Home ›› 18 May 2023 ›› Opinion
In precisely two weeks, the new budget for fiscal year 2023-2024 will be announced. Based on the income-expenditure estimate, the potential magnitude of the budget is projected to be approximately a quarter of eight lakh crore taka – the largest budget in the nation’s history that will be announced in this election year. Due to the deteriorating state of the global economy and the high rate of inflation, the business community is keenly interested in the budget for the upcoming fiscal year.
The unequal Russia-Ukraine conflict began just as the global economy had been beginning to recover from the losses caused by the pandemic. This conflict has created a worse financial dilemma than Corona. Although the United States has not participated directly in the Ukraine conflict, it has imposed severe economic sanctions on Russia. Russia has reduced its oil and gas exports to the European nations. The global supply side suffered a fatal collapse. Each nation’s domestic market is ravaged by inflation. In some countries, inflation reached levels that have not been seen in the last four decades. Bangladesh’s domestic market is also affected by the international market’s influence. Every product’s price on the local market has risen abnormally. The majority of the country’s population is now on the verge of destitution due to the rising cost of products.
After the global economic decline caused by the Corona pandemic, we are hopeful that the next national budget will prioritize economic growth. It must also guarantee that all benefits are distributed fairly among all citizens. Small and Medium-sized Enterprises (SMEs), agriculture, and the informal sector should be incentivized to invest in ways that generate inclusive economic growth. The next national budget should increase funding for developing small and medium-sized enterprises and the informal sector, which are essential for employment creation and poverty reduction. This can be accomplished through targeted financial incentives, access to low-cost financing, and small business capacity-building programmes.
Supporting the country’s digital transformation, the e-governance service is crucial for the next national budget to enhance public service delivery and to create new economic opportunities in the swiftly changing digital landscape of today. Among these are investments in digital infrastructure, promotion of digital literacy, and support for growth of the domestic ICT sector. The national budget should prioritize investments in science, technology, engineering, and mathematics (STEM)-focused education and skill development programmes. It will aid in preparing the workforce for the requirements of the 4th Industrial Revolution and contribute to the economic development of the nation.
To mitigate the negative effects of climate change, the national budget should increase funding for climate resilience and environmental sustainability. In order to protect vulnerable communities and ecosystems, these investments include renewable energy, disaster risk reduction, and sustainable infrastructure.
To finance these ambitious initiatives, the next national budget should focus on enhancing tax collection and revenue management. This can be accomplished through tax reforms, digitalization of the tax system, and capacity-building programmes for tax administrators.
Important budget recommendations:
• The rate of Advance Income Tax (AIT) should be reduced to 3% in order to reduce industry operating costs. Currently, the advance tax rate on income is 5%. Until June 30, 2010, the advance income tax rate was 3%.
• Increasing the tax-free income threshold for individual residents from BDT 3,00,000 to BDT 4,00,000, and for women and senior citizens from BDT 3,50,000 is required in consideration of the increased expense of living, inflation and overall economic conditions.
• Income tax offices must be established at all upazila levels in order to increase government revenue and the tax-to-GDP ratio; information technology and digitalization-based source-tax operations, income tax return submission, audit election, tax assessment, appeal, and refund procedures must be guaranteed.
• Currently, online submission is required only for VAT registration and VAT returns. All activities, including service of notices, online exchange of documentation, audits, and refunds, must be conducted online.
• The 3% Advance Tax (AT) on imported materials used in manufacturing should be eliminated gradually as this increases industrial production costs.
• Consumable goods used by low-income and poor people, transportation of general goods, daily essential goods and services, raw materials or materials of locally produced industries, waste management, recycling, repair or servicing sectors, etc. should be exempted of excise duty and supplementary duty.
• All activities, including VAT registration, return filing, refunds, and examinations, need automation. This automated system will make it easier for taxpayers to conduct businesses and for tax authorities to monitor taxpayers.
As a representative of the business community, I accompanied the Hon’ble Prime Minister Sheikh Hasina to Japan recently. Several agreements and decisions were made between the prime ministers of both countries. Japan has also pledged budgetary support. Bangladesh will receive 30 billion yen as development assistance from Japan.
It is not possible to meet the annual revenue goals every year and it causes a deficit at the end of the fiscal year. Nevertheless, many deficits can be eliminated by increasing and collecting revenue for the massive public welfare system, and by controlling inflation, and increasing revenue collection in accordance with International Monetary Fund (IMF) requirements. However, if the GDP deficit is below 5%, it does not appear to be a significant issue.
Bangladesh government should take more steps to facilitate commerce by reducing bureaucratic procedures, creating business-friendly policies, and ensuring a transparent and efficient system for business registration and licensing. A favorable business environment can both attract more foreign investment and foster the expansion of domestic companies. Additionally, there should be streamlined procedures for business registration and licensing, as well as improved access to financing and credit. To ensure that the budget is comprehensive and effective for the economic growth and development of the nation, policymakers should implement the aforementioned recommendations.
The writer is President, Bangladesh Malaysia Chamber
