MCCI for trimonthly budget evaluation

Niaz Mahmud

The Metropolitan Chamber of Commerce and Industry, Dhaka has called for an interim evaluation of the budget three months after it comes into effect in the wake of the ongoing pandemic.

“There should be an interim evaluation of the budget after three months, and every three months throughout FY2021-22, if required, to suit the need as the recovery trajectory of global economy is still uncertain,” the pre-eminent trade organisation said in its post-budget reaction.

The feedback on the budget by the trade body came on Friday through a media statement signed by its president Nihad Kabir.

Earlier on Thursday, Finance Minister AHM Mustafa Kamal placed his Tk 6,03,681 crore proposed budget for fiscal year 2021-22 before the parliament.

The Metropolitan Chamber of Commerce and Industry (MCCI) appreciates the non-renewal of the opportunity of whitening black money by paying only 10 per cent tax.

The organisation wants that the government reconsider its strategies for employment creation in a more specific way so that those who lost their jobs during the pandemic can return to the job market soon.

The chamber of commerce also appreciated the government move to reduce corporate tax for what it said “moving in the right direction”.

However, the budget proposed an increase in the corporate tax rates for mobile financial service providers.

Nihad Kabir observed that mobile banking as an industry is still in its nascent stage in Bangladesh, but still it has significantly improved financial inclusion; more than 110 million such digital banking accounts are in operation now. The mobile financial service providers are a flagship of the development of digital Bangladesh.

“Increasing their tax rate steeply at the time of pandemic, and effectively disallowing a large portion of their promotional expenses will cause a slowdown of the growth of such financial services and send a wrong signal to investors and users alike amidst all the positive signals of the budget,” added the business leader.

The MCCI welcomes the proposed income tax exemption of up to 10 years for newly established hospitals, agriculture and fruits processing industries, milk producers, producers of milk products, new areas in the IT sector, domestic manufacture of electronic home appliances, light engineering and skill development, vocational training institutes, made in Bangladesh brands, etc.

This will help develop import substitute industrialisation which will ultimately increase employment generation as well as save foreign currency.

Appreciating the plan to reduce the advance VAT rates, the trade association said it will facilitate business in the upcoming budget for FY22.

These are definitely stepping in the right direction, which the MCCI hopes will lead to zero advance tax in the future.

The organisation urges the government to use 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 as well as keep the budget deficit duly funded.

It thanked the government for giving priority in the upcoming budget to the protection of lives and livelihoods.

The government needs to strengthen vaccination programme so that economic activities can return to previous levels as soon as possible.

The business chamber believes that the upcoming fiscal year may be one of the most challenging years from the perspective of fiscal management due to present economic slowdown caused by Covid-19, not just in Bangladesh, but globally.

Revenue mobilisation will be a daunting task, given the various proposed tax concessions and administrative forbearances that will have to be allowed in practice to individuals and institutions in this very difficult time.

Because of the sluggish tax collection by the National Board of Revenue in the present fiscal, the proposed budget sets an equivalent target of Tk 330,000 crore for the upcoming fiscal year.

Besides, the budget has not indicated any specific reform and restructuring of the tax policy and tax administration to enhance its capacity and deliver the right kind of public services, which in turn will increase revenue collection without overburdening already compliant tax payers.

The chamber president said loss of tax revenue due to these exemptions should be compensated through reducing tax evasion by way of strict monitoring and supervision without harassment of compliant taxpayers, which is possible through automation, reform, restructuring and enhancing the capacity of tax administration.

Systemic changes will provide a faster growth of the tax-GDP ratio. For a significant improvement in the tax-GDP ratio and ensuring greater transparency in revenue collection, excessive and long-term exemptions, reduced tax rates and presumptive tax in sectors with significant contribution to GDP will have to be rationalised over time, observed the trade body in its focus on budget.