The Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI), in its post-budget reaction said tax compliant enterprises were likely to face severe pressure from the tax authorities as the proposed budget had set an ‘extremely difficult’ revenue target.
The organization on Friday made the comment through a media statement signed by its President Barrister Nihad Kabir.
“The proposed budget has set a revenue target for the next fiscal with an increase of 8.6% which will be an extremely difficult target to achieve, especially in the Covid-19 situation,” the MCCI said, adding that the National Board of Revenue (NBR) even in the current fiscal might see a 25% shortfall in revenue collection.
On the other hand, the proposed budget did not present any indication of reforming and restructuring the tax administration to achieve the higher target, it added.
As a result, revenue officials might exert pressure on regular taxpayers to fulfill their target, the leading business body believes.
The MCCI suggested that the government bring about meaningful structural changes in tax administration aimed at developing an effective tax collection mechanism without burdening the few regular taxpayers, while many people having high amounts of income remained out of the tax net.
In the budget reaction, the MCCI appreciated the finance minister for giving priority to agriculture, food security and the health sector and expanding the coverage of the social safety net programs.
On the budget deficit, the MCCI suggested the government use its diplomatic strength in pursuing different sources of funding which are being made available internationally for Covid-affected countries.
The government looks to borrow Tk84,980 crore from the banking sector to meet the budget deficit, which is slightly higher than the revised target of Tk82,421 crore (original target of Tk47,364 crore) this fiscal year.
Bank borrowing should be very carefully implemented so that the impact did not further lower the already historically low private sector credit growth, it suggested.
The organization said that Bangladesh Bank would need to work closely with the banks, some NBFIs and effective NGOs as well as other stakeholders to ensure that the allocated funds (stimulus package) reach the cottage, micro and small enterprises, for which the current regulations are too cumbersome to be complied with.
The MCCI said that corporate tax rates had been reduced, which was highly appreciated as the first move in the right direction.
“We trust that over the next several years, this trend to lower the corporate tax will continue,” said Nihad Kabir.
The MCCI expressed its deep concerns about allowing indiscriminate opportunity of whitening black money by paying only 10% tax.
“We have seen in the past that such opportunities to whiten black money have not yielded much results. The cost benefit analysis will show a higher cost and almost no benefit. This will seriously discourage compliant taxpayers, and in fact be seen as penalizing them,” it said.
The opportunity should have been given for investment in specific sectors only, like employment creation, enhancing social safety net, innovation, technology transfer, etc.
The budget has provided for severe penalties for over-invoicing and under-invoicing in transactions which it appreciated.
However, the MCCI urged the government not to harass businesses in the matter of genuine transactions and business activities, particularly related to exports and imports.
The recovery of the global economy is still uncertain due to the ongoing pandemic. Therefore, the MCCI feels that there should be an interim evaluation of the budget after three months, and every three months for the next year, so that, if required, it can be restructured and revised accordingly.
As there are still many “unknown unknowns” to be dealt with in regard to the pandemic and its ongoing effect on society and the economy, the need of the hour is flexibility to deal with situations and requirements swiftly as they arise, the MCCI remarked.