Country’s leading business leaders urged the government for immediately implementing measures proposed in the budget for the coming 2019-20 fiscal year for ensuring discipline in the financial markets, especially in the banking sector.
Mentioning that the budget has announced a number of financial tools for bringing transparency in the financial sector and proposed formation of a Bank Commission, they said that merger and acquisition of financial institutions could be also some implementable prescriptions.
Business Initiative Leading Development (BUILD), a think-tank of the leading chambers like Dhaka Chamber of Commerce and Industry (DCCI), Metropolitan Chamber of Commerce and Industry (MCCI) and the Chittagong Chamber of Commerce and Industry (CCCI), made the observation over the budget proposal.
The 48th national budget with a mammoth size of TK 5.23 trillion was proposed at the parliament on Thursday, aiming at achieving an ambitious GDP growth target at 8.2 percent.
The main features of the budget include enforcement of new VAT & SD Act, reduction of SD on some locally produced goods, start up financing facilities for the young people, allocation for R&D, increase threshold of turnover tax and VAT exemption limit, BUILD mentioned.
Increase of allocation for education up to 3.04 percent, increased number of education institution under MPO, raising income tax exempted turnover threshold to Tk 50 lakh from Tk 36 lakh will encourage SMEs for further growth, it said.
The target of revenue collection is 3.26 trillion, which is 10.13 percent higher than the previous one and 16 percent higher than the revised target.
Achievement of revenue collection in the first nine months of this fiscal is 55 percent of the revised target, with a shortfall of 45 percent. In this situation, how much rational the target of revenue collection through NBR, BUILD questioned.
The size of ADP in 2018-19 is 17.18 percent higher than the previous year, ADP implementation is still sluggish, though it shows 2 percent growth in ADP implementation in the first 10 months of the ongoing fiscal 2018-19 compared to the previous fiscal. The ADP of 2019-20 is Tk 2.02 trillion, which is 16 percent higher. This needs proper steps to increase implementation in the coming year, it added.
The non-development expenditure of 2019-20 is 9.6 than of GDP, while development expenditure is 7.3 than. Aspiration of achieving higher GDP growth contradicts with the expenditure. Lump-sum allocation for different purpose increased 57 percent than the outgoing budget which needs better clarification.
The proposed budget deficit is much bigger, 5 percent of GDP, worth Tk 1.45 trillion, which was Tk 1.25 trillion in the last fiscal. The government will collect funds from banks and saving certificates and other sources of which from banks the amount is Tk 0.47 trillion while banks are not good in situation.
The government is going to implement the long-waited VAT & SD Act 2012 with some remarkable changes. The number of online registration has gone up to one lakh seventy thousand, of which turnover taxpayers is 5000. It has declared three rates of VAT – 5 percent, 7.5 percent and 10 percent apart from the universal VAT rate of 15 percent.
The reduced VAT rates are non-creditable. Twenty goods and services are brought under 10 percent VAT slab, twelve under 7.5 percent slab and 93 under 5 percent slab. The cascading effect would push the price of the selected 125 items as there is no scope of VAT credit over the whole value chain from production to distribution to the ultimate consumer, said BUILD.
The VAT exemption limit has been increased to Tk 50 lakh from 30 lakh, turnover tax threshold has been enhanced from 80 lakh to three crore at 4 percent which was 3 percent last year.
SME items would be costlier as their tax incidence is exactly equal to the turnover tax rate defined by NBR. Whereas the VAT incidence is less than two percent of comparatively large industries as they would enjoy VAT credit facility, said BUILD. The income tax threshold has not seen any change in last four years, whereas inflation has been around 5 percent in a situation when purchasing power of lower-middle class people has reduced. It is praiseworthy that tax holiday has been extended till 2014 and a number of new sectors have been included, but the highest exemption limit which was 100 percent in the 1st and the 2nd years has been reduced to 90 percent, and 80 percent respectively. This policy applicable for less developed areas of the country could discourage new investment slowed industrial dispersion.
The corporate income tax rate has also kept unchanged while the private sector was expecting some reductions in this field.
The new Customs Act 2018 expected to be implemented through this budget, was not reflected. Reduction of SD on cigarettes and Biri will have a negative impact on health ground while an increase of SD on mobile phone services will straight impact the poor people.
Announced budget said that all types of exported and imported good will be scanned newly which is a good initiative, but for full implementation it needs proper attention and monitoring.
