Dhaka based trade organisation Metropolitan Chamber of Commerce and Industry (MCCI) has said the FY20-21 budget should focus on stabilising lives and livelihoods without being concerned much over deficits and growth targets.
From a business perspective, the first priority of a budget must be to ensure the citizens' health and economic security and secondly to infuse vitality in economic activities through raising the aggregate domestic demand, it said through a press release.
The press release was issued on Friday to express the organisation's observations and suggestions about the budget for the fiscal year 2020-21.
According to the release, the budget may be based on four main strategies: prioritising government spending on essential sectors; creating loan facilities to help enterprises get back onto their feet; expanding coverage of the social safety network; and increasing money supply to the economy.
MCCI feels that there should have been more focused indications in the budget for recovering jobs which have been lost due directly and indirectly to the Covid-19 pandemic; creating new jobs; and also to retain existing jobs in the labour market.
The benefits of enhanced allocations will not be fully derived until the government enhances its capacity for implementation as well as maintaining accountability and transparency.
Revenue mobilisation will be a daunting task, given the various tax concessions and administrative forbearance, the release added.
The current 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.
Besides, the budget did not present any indication in reforming and restructuring the tax administration to enhance its capacity to deliver the right kind of public services and to achieve the higher target set, the release further said.
In light of the disruptions caused to the economy already, and possible further disruptions, the budget deficit may be more than the target.
MCCI strongly urged the government to use its diplomatic strength to pursue all different sources of funding in order to reduce the pressure on domestic resource mobilisation as well as keep the budget deficit duly funded.
Bank borrowing should be very carefully implemented so that the impact of crowding out does not further lower the already historically low private sector credit growth.
There is no alternative to raising the level of private investment including foreign direct investment (FDI) if Bangladesh is to confirm the status of middle-income country by 2021.
The present GDP growth target of 8.2 percent for FY21 is perhaps very ambitious, considering the pandemic situation.
MCCI thinks that the government need not over-emphasise attaining GDP growth as against attaining financial and social well-being of the citizens in the current situation.
Appreciating a higher ADP allocation, the MCCI said a higher allocation in the ADP is needed to fulfil our development goals amid the coronavirus pandemic.
MCCI urged the government to take necessary measures to ensure efficient and effective spending of the ADP funds.
MCCI noted that the corporate tax rates have been reduced which will provide some much-needed relief in these difficult times.
The business body, however, expressed its deep concerns about allowing indiscriminate opportunity of whitening black money by paying only 10% tax. "This will seriously discourage the compliant taxpayers, and in fact be seen as penalising them."
The budget has provided for severe penalties for over-invoicing and under-invoicing in transactions which is appreciated.
However, it is noted that even in proven cases of illegal transfer of funds outside the country, be it in cash or through banking or other channels, very little action has been taken to bring the known perpetrators to book and recover the money, read the release.
Urgent actions should be taken in this regard. In applying the new provisions, harassment of businesses for genuine transactions and disruption of business activities, particularly related to exports and imports, must be avoided at all costs.
The upcoming budget proposed to reduce the tax rate on the import of some of the raw materials used in the production of SME products.
Duty and taxes on import of some products (e.g. nails, screws, small machinery parts, etc.) have also been proposed to increase to protect SMEs. "This is to be appreciated, but in the long run, policy interventions for enhancing productivity and competitiveness will be required to boost these sectors."