The revenue target set at Tk378,000 crore in the proposed budget will be difficult to collect due to the negative impacts of the current pandemic, observed the Institute of Chartered Accountants of Bangladesh (ICAB).
In a press release issued on Thursday, the ICAB said, "We expect that the government will finance the deficit from the money market without reducing credit flows to the private sector.
"No doubt, the proposed budget is ambitious and involves a lot of challenges in the implementation process. Impediments to on-time implementation of ADP [annual development prorgramme] projects should be addressed to achieve the targets of GDP growth set in the proposed budget," the ICAB added.
On Thursday, the government announced a Tk568,000 crore budget – equivalent to 17.9 percent of the GDP. The total budget has increased by 13.24 percent compared to the revised budget of the 2019-20 fiscal year. Development budget increased by 6.27 percent compared to the revised budget.
The ICAB appreciated that the proposed budget of FY2020-21 has prioritised health, agriculture, social safety net and job creation for recovering from the current crisis.
"Corporate tax rates reduced from 35 percent to 32.5 percent is a relief for the local companies and this will also encourage industrialisation and foreign direct investment (FDI) in Bangladesh," ICAB opined.
In the proposed budget, the threshold of tax-free income has been raised to Tk3 lakh from Tk2.5 lakh for individual taxpayers and a 5 percent tax slab has been introduced instead of the existing 10 percent. The highest tax slab has also been reduced to 25 percent from existing 30 percent.
"This will give relief to low-income people and encourage tax payers to disclose their actual incomes, which will boost the country's image and global ranking to attract FDI, ultimately bringing positive impact in revenue collection and employment," said the ICAB.
In view of the current unusual situation, the ICAB found rationality in widening the areas of investment for previously undisclosed income by paying taxes at a lower rate.
However, it expects that this extraordinary measure will not be continued beyond the stipulated year.
The chartered accountants' institution welcomed the proposal of reducing advance tax from 5 percent to 4 percent for importing materials, and the extension of time limit from two to four months to claim both input VAT rebate and decreasing the adjustment of advance tax.
"This gives more flexibility to businesses. Amendments allowing businesses to claim 80 percent rebate on VAT paid on transportation bill and to claim input VAT rebate for utility bills like Wasa, Desco, Titas, etc. without Mushak 6.3 are also business friendly moves," said the ICAB.
This will reduce the cost of businesses. However, the ICAB thinks that the amendment restricting the time for using the materials, purchased or imported, within four months is an impracticable proposition and will be difficult to monitor and may increase disputes and harassment.
The existing provision in this regard was better at catering to the purpose. The ICAB therefore suggested deleting the proposal.
"Increase of disputed VAT deposit at the time of filing appeal to First Appeal and VAT Appellate Tribunal from 10 percent to 20 percent will pose a big burden for the business. This should be kept as it is," ICAB said.
The ICAB welcomed the exemption of VAT on Covid-19 medicines, test kits, PPE and surgical accessories at import, manufacturing and trading stages.