The size of the proposed budget is not unrealistic, but it has several challenges to tackle, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) said yesterday.
Ensuring good governance, maintaining political stability, providing necessary power and gas are the key challenges for the government in implementing the budget, the country's apex trade body said in a statement.
FBCCI urged the government to speed up the private sector's investment. “It is an urgent need to increase investment and production to achieve the revenue target,” it said.
The FBCCI welcomed the proposal to widen the tax net and provide incentives to protect the local industries. “We believe it is a positive step for the overall economy,” it mentioned.
Banks will be a major source of funds to finance the budget deficit, and the government has set the borrowing target at Tk 31,221 crore.
The chamber said high dependence on bank borrowing may have a negative impact on the likelihood of private companies to getting loans from banks.
It demanded that the government set the turnover tax at 0.3 percent for all export oriented companies. In the proposed budget, the tax deduction rate at source on garment exports has been reduced from 0.8 percent to 0.3 percent, and for all other exports, the rate has been reduced from 0.8 percent to 0.6 percent to give exports a competitive edge.
FBCCI also hailed the government's proposal to impose a green tax on polluting industries.
Muhith, in his budget speech, proposed imposing 1 percent 'Environment Protection Surcharge' or 'Green Tax' on an ad-valorem basis on all kinds of products manufactured by polluting industries.
“It is a good initiative but the government should take appropriate steps so that taxmen cannot harass the companies on collecting such a surcharge,” the chamber said.
The association also praised the proposal to exempt duties on the import of billet manufacturing raw materials, such as sponge iron and reduced iron, and increase duties on imported LPG cylinders.
“The move will help grow the domestic industries further,” it said.
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said the proposed budget would have a positive impact on the readymade garment sector as it was given special priority.
Garment makers commended the government for reducing the tax to 3 percent from 5 percent on the earnings from cash incentives given by the government to the exporters.
BGMEA also said a duty exemption on the import of prefabricated building materials and fire safety equipment would help the sector grow and improve safety standards.
Foreign Investors' Chamber of Commerce and Industry (FICCI) termed the GDP growth rate of 7.3 percent ambitious, but praised the budgetary allocation to eliminate extreme poverty.
The chamber also appreciated the budget proposal to extend the tax holiday benefit and reduce the rate of tax collection from the dealers and distributors from 5 percent to 3 percent.
The chamber, in a statement, also welcomed the proposals to reduce the rate of corporate tax for unlisted companies from 37.5 percent to 35 percent and the rate of customs duties on a number of raw materials consumed by the pharmaceuticals industry.
FICCI also praised the surcharge to be imposed on industries that pollute the environment.
However, the chamber expressed concern over some proposals, like introducing a SIM replacement tax for the telecoms operators.
A hike in the customs duty rate from 2 percent to 25 percent on some accessories consumed by electrical manufacturers will increase the cost of production.
FICCI also expressed concern over enhancement of the truncated VAT rate for transport service providers from 4.5 percent to 7.5 percent, said its statement.
In another statement, Chittagong Chamber of Commerce and Industry (CCCI) praised the government for withdrawal of the tax at source on opening letters of credit to import basic commodities like potatoes, onions, garlic, gram, lentils, ginger, turmeric, pepper, rice, wheat, flour, maize, salt, edible oil and sugar.
CCCI criticised the proposal for not having clear directions on investment.
Bangladesh Women Chamber of Commerce and Industry congratulated the government for continuing the Tk 100 crore in grants for women entrepreneurs in the budget for 2014-15.
It said the proposed budget will further help empower women entrepreneurs and accelerate overall development of the country.
The association however urged the government to introduce a single digit interest rate for women entrepreneurs against bank loans and tax relief for women's income of up to Tk 350,000 in the revised budget for 2014-15.