A budget driven by Covid-19 realities
Sheikh Fazle Fahim, FBCCI President
The 2020 budget will be driven by the realities of Covid-19 and reflect a continuous budget based on the seventh five-year plan with an outlook of vision 2021 and 2041.
Stimulus grants and loans have already been announced for the formal and informal sectors.
Loan stimulus was the judicious first phase of intervention. In the second phase, the budget may also reflect tax, VAT and customs interventions for businesses. There could be grants for SMEs to sustain themselves for the next year and revive themselves in the following two years, considering a projected domestic and export shrinkage of 30 percent.
The advance income tax rate should be revised from five percent to three percent, which should be adjustable if lower than three percent.
The advance tax should be withdrawn on industrial raw materials. For commercial imports, it should be adjustable through a proper mechanism without delay. Rebatable VAT needs to be revised from 15 percent to 10 percent, while other non-rebatable multiple VAT rates need to be revised as they add inflationary pressure on end users.
VAT on turnover of Tk3 crore should be revised from four percent to two percent.
VAT should be exempted in economic zones as per earlier policies. Policy consistency for an investment-friendly environment will only supplement the progressive measures of the government. Customs duties should be adjusted to facilitate further industrial growth, investment and job creation.
During Covid-19, luxury products may be discouraged through customs tools, which may be a source of revenue.
Export source tax should be revised considering export shrinkage due to Covid-19 for the next year. Corporate tax should be revised to 25 percent over the next three years.
Globally, construction is a priority sector in post Covid-19 economies. Therefore, domestic and commercial real estate purchase financing schemes for consumers may be introduced for 25-30 years; a percentage of banks' and NBFIs' exposure should be earmarked for real estate purchases.
SMEs are the backbone of our economy. They create jobs, assist in consumer spending and help with money circulation. SMEs should be considered for applicable tax and VAT moratorium, discounts or exemptions for the next year. Actionable policy measures to include them in the formal economy should be executed so that as we move towards LDC graduation, our SMEs may position themselves to be part of a global value chain. The government may consider 40-year low-cost financing – from the ADB, WB, IDB, etc. – to provide grants to SMEs who avail the Tk20,000 crore package.
There has been a downward trend in revenue mobilisation. The above-stated measures will add to that challenge. This shortfall of revenue may be adjusted through deficit financing by: securing international financial sources, using diverse financing instruments, restructuring the annual development programme, reprioritising non-time sensitive projects, increasing austerity for unproductive expenditures, using limited customs tools, using other non-revenue sources, plus widening tax and VAT nets.
By 2023, widening the tax and VAT net in compliance with LDC status will assist in greater revenue, where FBCCI members are willing to extend support. Inclusive revenue framework adjustments in line with contemporary LDC countries will assist to encourage greater domestic and foreign direct investment.
Many enterprises will lose business and the lives of many individuals will change for the worse. Over the last decades, the private sector contributed substantially to employment generation, money circulation and revenue, while the government created the environment. Under the present realities, we consider the revisions of the revenue framework will assist enterprises along with numerous stimuluses the government has progressively initiated.
We acknowledge the challenges the NBR has, but we are willing to work with you so revenue shortfalls are minimised in the short term through widening of the net. Revenue growth is sustained through a wider revenue net, scientific projection and LDC compliant industrialisation-friendly revenue framework.
Healthcare budget should be no less than 12% of total
Azam J Chowdhury, President, Bangladesh Association of Publicly Listed Companies and Chairman, East Coast Group
The allocation for healthcare should be no less than 12 percent of the total budget. I do not mind if the government makes a similar allocation to education as well.
The government should also support local industries that are both export-oriented and are engaged in the domestic market.
Lakhs of Bangladeshis who work in different countries are in a critical situation in terms of employment and personal finance. They are losing jobs and more will face job and pay cuts in the months to come. The government should tackle the issue wisely so that our inward remittances do not fall so much that they affect our balance of payment.
Budget should protect local industries
Hafizur Rahman Khan, Chairman, Runner Group
The upcoming budget must focus on protecting all local industries so that there are employment opportunities. The government should not impose any new duty or VAT on locally-manufactured products.
The budget should give all necessary support to export-oriented industries so that they can overcome the present worldwide economic crisis.
The government should also ensure necessary cash flow through the money market and the broader economy to increase purchasing power of the middle-income and the lower middle-income groups.
Apparel sector needs long-term tax support
Rubana Huq, president of BGMEA
The apparel sector that has been struck by the Covid-19 pandemic needs tax support for a long term.
We want our existing corporate tax rate at 12 percent and source tax at 0.25 percent for the next five years. Green factories that enjoy a 10 percent corporate tax rate should also be provided for at least five years.
The garment sector should get a full waiver from paying VAT on local purchases. Devaluation of local currency is another important issue which the government should address to help exporters become competitive.
Corporate tax should be cut by 5%
Rupali Chowdhury, managing director, Berger Paints Bangladesh Ltd and president of the Foreign Investors Chamber of Commerce and Industry (FICCI)
Corporate tax needs to be cut at least by 5 percent to help the businesses survive the coronavirus impacts. Minimum tax deduction system should be cancelled and advanced tax needs to be withdrawn.