Home ›› 12 May 2021 ›› World Biz
With a progressive tax rate and enough allocation for the health sector and social safety net programme, the budget for the fiscal year 2021-22 should strongly focus on a road to recovery from the economic fallout due to Covid-19, said Dhaka Chamber of Commerce and Industry President Rizwan Rahman.
Rizwan shared his thoughts on the next budget in an interview with The Business Post, stressing on investment to generate employment for people most of whom lost jobs due to the pandemic.
What is your expectation from the FY22 budget?
We did not make the current budget Covid-centric as it was prepared earlier and most of the decisions were made on an ad-hoc basis later to tackle the pandemic related challenges.
Economic recovery from the Covid-19 pandemic should be the principal focus of this budget. It strongly has to be a road to recovery. We have to ensure protection for SMEs as they are the major players in creating employment.
What should the corporate tax rate be in the next budget?
Compared to global and Asian averages, Bangladesh’s corporate tax rate is quite higher, which discourages new investments from home and abroad.
Therefore, my suggestion is to reduce corporate tax gradually, which should be brought down from 32.5 per cent to 25 per cent in the next three years. Otherwise, we would not be able to attract foreign investments relocating from China.
However, to increase revenue collection, the government has to widen the tax net. For this, the National Board of Revenue (NBR) has to set a target aiming to widening the tax net instead of setting a target for collection.
In addition, there is no alternative to automation of the tax submission process and other related issues to improve the collection of revenue.
How should the stimulus package be designed in the next budget to ensure a level playing field for all?
The SME sector contributes 25 per cent to the country’s GDP but its contribution is ignored in the stimulus packages. The informal sector also contributes a lot.
In ensuring friendly fiscal support for the cottage, micro, small and medium entrepreneurs (CMSMEs), the government needs to allocate stimulus packages based on the contributions of the sector.
It will also reduce the disparity between the small- and large-scale industries.
Solutions towards the crisis should be mathematical instead of emotional and the allocation in the budget should be based on the needs and necessity of the industry.
The budget allocation should enclose a clear implementation road map for reaping the best benefits.
Bangladesh Bank should empower chambers, SME Foundation and NGOs to expedite the disbursement of stimulus packages for the SME sector.
The government should gradually cut the corporate tax to boost private investment from home and abroad.
What kind of special measures can be offered in the budget for SME entrepreneurs to help with recovery?
Bringing all the SMEs under the stimulus package is quite impossible as they are scattered and informal, the government has to waive Value Added Tax (VAT) and cut income tax for the entrepreneurs of this segment.
What should the budget offer to increase private investment?
We have to strengthen the local industry to boost investment. To do so, the government should offer fiscal incentives and non-fiscal support.
In the last 50 years, the government mostly nurtured the apparel industry, which helped Bangladesh to become the second-largest clothing exporter in the world. Now it is time to move the focus to other sectors and we should follow the RMG model for other industries.
If the government does not promote the other sectors, we would not be able to attract Foreign Direct Investment as foreign investors consider local entities to invest here.
The only way to increase investment is to strengthen the local industry.
How to retrieve employments lost due to the pandemic?
It is not possible to retrieve employments in the informal sector overnight.
As the novel coronavirus will not go away soon, the government needs to provide cash incentives to the people unemployed because of the pandemic.
Taking lesson from the pandemic situation, it can be said that establishing a database of informal workers is essential to their rehabilitation.
On the other hand, the government should ensure training to upskill and reskill workers as the industry is going through a transformation where technology is being adopted largely.
How to make the tax system investment-friendly?
To make the existing tax system investment-friendly, we need massive reform, not reduction, as reform will make the system business-friendly.
I am hopeful about changes in the tax system as well as in tax rate as the regulator body assured us to do so during several meetings.
What should the health budget contain?
For treatment purposes, billions of dollars fly away from our country as people go abroad for treatment.
The outbreak of the Covid-19 has exposed the vulnerability of our health sector. There is no solid health coverage system here to face any such crisis.
There is no alternative to investment for improving the health sector. Government expenditure on health should be at least two to three per cent of the GDP.
Private sector investment should be welcomed as the public sector has been unable to do more in this sector.
However, there should be a system to monitor the private sector so that it could not turn out as government-run hospitals.
