Most of the demands of the major trade bodies remained unmet in the proposed new budget made on Thursday.
Trade bodies including BGMEA, FBCCI and BCI demanded the source tax on exports be reduced from 1% to 0.5% in the upcoming FY24 budget and that should remain in place for the following five years, but the new budget shows otherwise.
Moreover, the budget also didn't meet demands including a reduction in corporate tax and other tax-related benefits.
Anwar Ul Alam Chowdhury (Parvez), president of the Bangladesh Chamber of Industries (BCI), said that regarding the current global and domestic situation, the budget for FY24 is very challenging for the government.
However, the budget information appears to be incomplete as it didn't give any clear direction on business.
“Regarding the global economic turmoil, industry efficiency and competitiveness of the manufacturers are the most important, but the budget didn't provide any clear direction on it,” he added.
The proposed budget sets a 7.5% GDP growth but didn't provide specific direction to achieve it, same goes for inflation which has been set at 6%, he added.
FBCCI President Jashim Uddin told the media that the projected budget has a 16% increase goal for tax revenue in the upcoming fiscal year 2023–2024 and the businesses are worried and concerned regarding this considering that they are constantly designated the top targets for tax collection.
He added saying, increasing tax revenue and the size of the federal budget are both necessary to realize the government's aspirations for a trillion-dollar economy. The National Board of Revenue (NBR) and other tax-collection entities must undergo a structural transformation in order to achieve this.
It would be easier to disperse the tax burden more equitably and prevent it from being disproportionately carried by a small number of companies if it were extended to new sectors. This is something that they have long recommended.
The finance minister proposed raising the tax-free income threshold for individual taxpayers from the current Tk3 lakh to Tk3.5 lakh and the FBCCI praised the proposal.
“Given the rising rate of inflation over the past two years, it would be preferable if the cap were established at least Tk4 lakh,” he added.
Shahidullah Azim, vice-president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told Dhaka Tribune that the government tried to formulate a welfare-oriented budget in a time of global economic turmoil.
However, the realization of the proposal will be challenging for the government.
Regarding the RMG sector of the country, he said that they demanded a set of advantages in the budget but it didn't meet.
“Corporate tax, a source at tax, other taxes – all are unchanged though we demanded it regarding the current global situation and industry's turnaround from the post-pandemic position,” he added.
He also said that the growth of a country heavily relies on industrial development.
“If industrial growth occurs properly, then it accelerates overall economic growth, employment generation,” he added, saying that the government should consider it before the final approval of the budget.
Masrur Reaz, chairman of the Policy Exchange Bangladesh (PEB), told the media that due to the ongoing global issues and some domestic issues of the country, the economy is facing some challenges like high inflation and pressure on the balance of payment and the prime priority of the budget is to address these challenges.
The second context is the IMF conditions, Bangladesh is now coping with IMF conditions and most of them are related to the budget like the process of formulating the budget, the subsidies, revenue target, Tax net expansion, Tax-GDP ratio and many more.
The third context is the cost of living for people and the cost of business is in a significantly difficult phase.
“The question is having the budget able to prioritize these challenges? I think there are some positive facts which include rural development, agriculture and some good allocations,” he added.
Regarding a question on whether it is possible to generate revenue in the existing tax structure, he said that the target is not realistic regarding the current economic situation.
Barrister Samir Sattar, president of the DCCI, told the media that the businesses and the supply chain are still in a dire situation due to the Ukraine-Russia war which brought several crises like supply chain disruption, energy crisis, and dollar crisis.
“In this situation, the budget worth Tk7,61,785 crore is challenging but achievable if everyone works together. It will be difficult without PPP,” he added.
Tax automation is a must. Moreover, the tax net should be expanded through proper mapping, he added, saying that it is also important to bring the informal sector under the tax purview.
“ADP should be implemented properly and by prioritizing. Austerity measures should also be taken properly to achieve the big budget,” he added.
The main challenge of this budget is taming inflation – food and non-food – and monetary, and fiscal policy should be introduced along with strong monitoring.
Md Saiful Islam, president of the MCCI, said that amid the domestic and international complexities created by the Covid-19 pandemic, the Russia-Ukraine war and Bangladesh's pursuit of becoming a developing economy in 2026, it was extremely challenging for the finance minister to prepare this budget before the national election.
It is assumed that the “Income Tax Act, 2023” is going to be introduced in the upcoming budget session. However, it is imperative to share the matter with the stakeholders, especially the business community, for a final opinion before raising the issue in parliament, he added.
CPD Executive Director Dr Fahmida Khatun said that various elements of the budget hint at the fulfillment of the terms and conditions of the IMF, even though the budget document does not clearly state them.
She also said that the budget of FY24 is proposed at a very challenging time when macroeconomic stability is broken and there are multifaceted pressures.
Finance Minister AHM Mustafa Kamal proposed the budget for FY2023-2024 worth Tk761,785 crore on Thursday.
