The Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) has responded to the proposed budget for the 2023-24 fiscal year (FY) in Bangladesh.
While acknowledging the challenges faced by Finance Minister AHM Mustafa Kamal in preparing the budget amidst domestic and international complexities, MCCI believes that stakeholders, especially the business community, should be consulted before finalizing certain aspects of the budget.
They also called for addressing concerns and strengthening implementation for inclusive growth.
The proposed budget for FY24 amounts to Tk761,785 crore, representing a 12.35% increase from the original budget of Tk678,064 crore and a 15.33% increase from the revised budget of Tk660,507 crore in FY23.
While MCCI recognized the government's focus on quick economic recovery through a Tk263,000 crore Annual Development Programme (ADP), there are concerns regarding revenue collection targets, tax policies and implementation challenges.
The budget deficit has been set at Tk261,785 crore in FY24 (5.2% of GDP).
Out of the total deficit, Tk106,390 crore will be financed from external sources, while Tk155,395 crore from domestic sources.
Out of Tk155,395 crore, Tk132,395 crore will come from the banking system and Tk23,000 crore from savings certificates and other non-bank sources.
MCCI believes that the budget deficit is likely to increase because of the proposed tax conditions by the International Monetary Fund (IMF).
The chamber believes that proper financial management is crucial to limit expenditure on government projects and urged the government to reduce borrowing from the banking system to avoid crowding out private-sector investments and inflationary pressures.
The government borrowing target from the banking system is Tk132,395 crore, an increase of 14.70% from the revised budget (Tk115,425 crore) of FY23.
MCCI sees a double bind for government bank borrowing. First, an increase in borrowing from the banking system may create a crowding-out impact on the economy and lead to fund shortages for private-sector investors.
Second, if the government borrows from the central bank, inflationary pressure will increase.
Furthermore, the chamber emphasized the importance of a pro-poor and inclusive budget that significantly increases assistance through social security programs.
The chamber highlighted various obstacles to economic growth, including underdeveloped communication systems, inequitable distribution of utilities, bureaucratic complexity and weaknesses in revenue collection and ADP implementation.
MCCI called for prudent measures in foreign exchange spending due to the high import trend and the impact of the Russia-Ukraine war. The chamber recommended controlling high subsidies on power, gas and fertilizer prices to prevent a significant increase in subsidy costs.
MCCI expressed disappointment over the lack of proposals to revise cash transaction terms in corporate tax rates and suggested reducing the Tax Deduction at Source (TDS) rate for construction and infrastructure services.
The chamber also raised concerns about the negative impact of filing income tax returns with a minimum tax requirement on small and medium enterprises' transformation.
MCCI advised the National Board of Revenue (NBR) to conduct a detailed analysis of provisions related to "Tax Agents" and provide necessary briefings, training and guidance to maintain transparency and a healthy relationship between taxpayers and tax collectors.
While appreciating the government's efforts to develop export-oriented industries, MCCI suggested reducing the TDS rate for all export-oriented industries and calling for rationalizing the tax-GDP ratio.
The chamber emphasized the need for logical consideration or exclusion of business expenses disallowed by NBR and proposed the abolition of minimum tax on turnover.
MCCI supported the initiatives to raise the tax-free income ceiling for individuals and third-gender taxpayers, appreciates the clarification on VAT provisions and emphasizes the importance of an adequate supply of Electronic Fiscal Devices (EFDs) for efficient VAT collection.
The chamber called for automation of the VAT system and structural reforms in the VAT Act to enhance effectiveness and collection. Additionally, MCCI raised concerns about the increase in supplementary duty rates on imported goods and called for managing the impact on the cost of living.
The chamber welcomed the proposal to reduce tariffs on electric and hybrid vehicles in line with climate change goals but suggested exemptions for company vehicles and specific policies for managing used batteries.
MCCI also acknowledged the budget's focus on digitalization and emphasizes the importance of periodic monitoring and evaluation to address societal and economic concerns.
In conclusion, MCCI acknowledged the efforts made in the FY24 budget while calling for a detailed review and addressing the concerns raised to ensure effective implementation for inclusive growth.
The chamber reaffirmed its commitment to working collaboratively with the government and stakeholders to create an enabling business environment and achieve sustainable economic development.
