No special attention to small, informal businesses

Small and informal businesses have not received any special attention in the proposed budget for the 2021-2022 fiscal year, while experts and sector leaders expect more support to the crucial sector in terms of employment.

Small businesses – the least resilient among all businesses – across the country are struggling most amid the second wave of the pandemic and the budget should better address them, said Dr Monzur Hossain, Senior research fellow at Bangladesh Institute of Development Studies.

In the proposed budget, the small and medium enterprise (SME) sector got one announcement – women-led SMEs will not be under the purview of tax until their annual turnover crosses Tk70 lakh, while the ceiling will remain unchanged at Tk50 lakh for SMEs led by men.

"We appreciate the announcement, as it will encourage our small women entrepreneurs. But the same relief should be applicable for all small enterprises since everyone is suffering due to the pandemic," said Mirza Nurul Ghani Shovon, president of National Association of small and Cottage Industries of Bangladesh (Nascib).

Around half of the small and cottage industries have been shuttered due to the pandemic, he said, adding those who are still in business are struggling due to the adverse situation.

Nurul Ghani praised the announcements for tax holiday in agro processing, light engineering, which can be availed by some of the small and medium enterprises.  

"But in the given bad time, income tax should have been flatly reduced for all SMEs. Value-added tax (VAT) should be generously waived this year, if the manufacturer firm is a small business."

Of the product-specific announcements regarding SMEs, only paper cone manufacturers will see their VAT go down to 5% from 15%, which is good, Nurul Ghani said, adding, "But, the facility could be extended to dozens more products and services mainly provided by small informal businesses."

He named small fast food shops and beauty parlours among many businesses which have been brought under the VAT net in recent months.

"Informal businesses that employ 87% of the labourforce would thrive, if they get some tax-VAT relaxation," Mirza said.

Dr Monzur of the BIDS too was expecting more for micro and small businesses from the budget, as virtually none of them have recovered up to their pre-pandemic level of business.

"In December last year, SMEs recovered up to 80% of their normal production. Now their situation should be worse, as the demand is still subdued and costs are higher," said the SME expert.

He expressed hope that the government would come up with a big stimulus for small and informal businesses that is a vital part of the economic backbone of the country.  

And also, to get rid of the disbursement issues, the government should take more initiatives so that low-cost loans flow through the grassroots level.  

According to official data, over 78 lakh small and medium enterprises are contributing one-fourth of the GDP.

The National SME Policy 2019 has focused on enhancing the contribution of this sector to 32% by 2024, which will boost employment.