Foreign Investors' Chamber of Commerce and Industry (FICCI) appreciated the proposed national budget for FY25, aimed at supporting the economy amidst challenges.
With a budget size of Taka 7,97,000 crore, constituting 14.2 percent of GDP, the government targets 6.75 percent GDP growth and 6.5 percent inflation for 2024-2025. FICCI sees these targets as ambitious, but achievable with an effective execution plan. The proposed reforms, especially in Income Tax and Customs aim to enhance revenue, reduce deficits, and enhance investor confidence.
These observations were made by Zaved Akhtar, president of the FICCI, at a post-budget press meet held today at a city hotel, said a press release. The chamber welcomed few proposals as presented in the Finance Bill, but expressed concerns over the extra duty and tax imposed on telecom, carbonated beverages water purifiers as the increased tax for manufacturers poses a crucial challenge to the profitability and viability of these businesses and will hamper attracting potential foreign direct investment (FDI).
FICCI also expected focus on financial sector reform, critical for a strong and resilient financial system. Stakeholders, including FICCI, highlight Bangladesh's low revenue-to-GDP ratio, urging the need for improvement. According to Household Income and Expenditure Survey (HIES), 10 percent of the population contributes to 40 percent of national income, but according to the National Board of Revenue (NBR), Bangladesh has only 10 million registered taxpayers, still a far cry from brining people within the tax net. While the government works towards this, results are awaited, FICCI suggested innovative approaches, such as sector-wise revenue analysis and increasing the taxpayer base.
FICCI also welcomed the acceptance of their proposed amendments in the Finance Bill 2024, particularly the prospective tax rate, fulfilling a long- standing demand from the business community. Maintaining these rates will enable businesses to plan and invest effectively. Additionally, FICCI expressed gratitude for the acceptance of their proposed amendment simplifying tax deduction at source for industrial raw materials.
The extension of time for monthly withholding tax return submission is also crucial, accepted through the Finance Bill 2024.
FICCI appreciated tax reforms in the proposed 2024-2025 budget to simplify the tax system. But, high Effective Tax Rates (ETR) remains a key concern for the industry.
While they appreciated the 15 percent income tax rate for private funds, they note concerns about exempting public funds from taxation, creating disparities between government and private
sector employees.
Projections indicate an expected GDP growth rise by +93 basis points and a decrease in inflation by +150 basis points. Detailed implications of deficit financing, such as potential higher interest rates and the need for a balanced approach to ensure fiscal stability, are crucial. The removal of incentives from private EZs and high-tech park while keeping incentives for government EZs may erode investor confidence, it said.
