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Dhaka Tribune

Specific guidelines imperative in upcoming budget for economic recovery

Dhaka Chamber of Commerce & Industry (DCCI), in association with Samakal and Channel 24, organized the webinar

Update : 10 Apr 2021, 07:34 PM

Specific guidelines are needed in the next budget for FY2021-21 to pave the way for economic recovery amid the Covid-19 pandemic, stakeholders said yesterday. 

They also urged the government to strike a balance between revenue targets and facilitating businesses.

They made the demands at a virtual pre-budget discussion to outline the needs in the key macroeconomic avenues and roadmap of trade, industrial, investment recovery as well as turnaround of private sector from pandemic adversities.

Dhaka Chamber of Commerce & Industry (DCCI), in association with Samakal and Channel 24, organized the webinar. 

Mashiur Rahman, adviser to the prime minister on economic affairs, and Hossain Zilllur Rahman, chairperson of Brac, joined the discussion as special guests. 

DCCI President Rizwan Rahman chaired and moderated the discussion.

The budget will have a clear indication for economic recovery amidst the pandemic, he also said.

Rizwan also hoped that the next budget would have special attention to taxation and value-added-tax (VAT) policy, infrastructure, industry and trade as well as the financial sector. 

He added that if the government and the private sector worked hand in hand, Bangladesh would be able to recover its economic momentum despite the pandemic. 

Mashiur Rahman said that the growth should be inclusive. Economy needs to be widened and all resources should be utilized. For the government, achieving revenue targets without hampering economic activities is a priority. 

He also suggested stakeholders to hold  budget discussions throughout the year. 

He also said taxation should be business-friendly. 

"We should focus on increased revenue collection for development, as well as facilitate and incentivize businesses. However, if the revenue target is not achieved, development will slow down," Mashiur also said. 

"Quality and safe investment will reduce default loans. A stable tax and duty regime for 7-10 years is a good move but all investors may not get this benefit as investments do not come at the same time. Our tax-GDP ratio is comparatively low because our tax elasticity is low in the country due to rebates in different levels. But, a social acceptance of tax, VAT, SD and customs duty rate of global standards is needed to be in place," he added. 

The adviser also said that frequent changes in tax rate may hamper business growth. Rather, he suggested a gradual increase of tax, mentioning a minimum timeframe.    

Brac chairperson Hossain Zilllur Rahman said that the second wave is going on and it may have a huge implication on the economy. 

The next budget should also have a plan of recovery as it did last year, he also said. 

Moreover, social protection should be a major concern in the next budget. Revenue collection and achieving the target is inevitable for a budget, but at the same time government must consider incentives for the pandemic-hit businesses, especially the cottage, micro, small and medium enterprises (CMSMEs). Disbursement of loan under stimulus for CMSMEs should be faster, and for that, mobile financial services can be engaged as a disbursing vehicle, he added.

Adeeb Hossain Khan, senior partner at KPMG, suggested allowing the import rebate system, with regards to the VAT Act. 

Syed Golam Kibria, member, customs policy and ICT, National Board of Revenue (NBR), said that from customs, the annual revenue target is about Tk1 lakh crore. 

"We will also work on the trade facilitation agreement compliance, and tariff rationalization," he also said.

The NBR will examine the fiscal incentive on hybrid car import, while duty cut on import of freezers used for super shops will also be considered, he added. 

"At present, our online VAT returns have increased, we are focusing on automating that process. In the new VAT law, price declaration is not mandatory. However we need to widen the VAT net," said Masud Sadik, an NBR member from the VAT department.

Another NBR member on tax policy Md Alamgir Hossain said: "We need to strengthen our capital market as well as a strong bond market. We have different tax rates so the overall tax rate is 32.5% is not true as a whole. We are trying to reduce the tax rate by widening the tax net."

IPDC CEO Mominul Islam urged for a long-term bond market, and to also reduce corporate tax to 30% for non-bank financial institutions (NBFIs).

Naser Ezaz Bijoy, CEO of Standard Chartered Bangladesh, strongly urged for easy access to finance to the SMEs, while incentives should also be given for export diversification. 

Rahel Ahmed, CEO of Nagad, suggested to incentivize the mobile financial services, as there should be a micro merchant policy in the next budget. 

Asif Ibrahim, chairman of Chittagong Stock Exchange, said that corporate tax for listed and non-listed companies needed to be slashed.

Kazi Inam Ahmed, president of Bangladesh Supermarket Association, said that there are 300 super shops in Bangladesh, but 1,500 such in Sri Lanka. 

"We have to pay extra 5% VAT. This needs to be reviewed," he suggested. 

For super shops, he proposed duty cuts on importing capital machineries.  

Mustafiz Shafi, acting editor of Daily Samakal, said that the newspaper industry has to pay 37.5% corporate tax, and an additional 5% duty while importing newsprint.

Therefore, he sought duty cuts and reduction of corporate tax. 

Md Fazlul Haque, former president of the Bangladesh Knitwear Manufacturers and Exporters Association, said that there were a good number of leading green factories in Bangladesh. 

The government may consider duty-free access to machineries importers of effluent treatment plants (ETP). 

Moreover green factories should get incentives, he added.

Md Jashim Uddin, vice chairman of Bengal Group of Industries, said that the upcoming national budget should give incentives to the industry sector for employment generation. 

Moreover all the problems of tax, VAT, AIT, SD and Customs duty need to be solved. He also urged for strengthening backward linkage industries. 

Md Masudur Rahman, chairman of SME Foundation, said that 68% of stimulus which is Tk13,600 crore, has been disbursed to CMSMEs, but all of them did not reap its benefits.

 Due to pandemic, salary in SMEs came down by 10%, he also said. 

Light engineering sector is a promising sector that has a market of 70,000 core taka but corporate tax for accessories industries is 32.5% that needs to be reduced, Masudur added. 

Md Faizur Rahman, CEO and MD of United Hospital, said that local expertise did well for the local healthcare sector in the pandemic, but what is really required is good infrastructure. 

"We need macro level planning in the health sector taking it as a priority sector like IT or RMG sector. We need 250,000 doctors and 500,000 nurses. Public and private partnerships (PPP) should be incentivized in the health sector," he added.

Abul Kasem Khan, chairperson of BUILD, said: "If we can generate employment, additional tax rebate can be offered." 

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