Bailout package bottleneck still a concern
Trade body and business chamber leaders said the economic recovery from the coronavirus pandemic is largely dependent on prompt implementation of the stimulus package.
Over-borrowing by the government from the banking sector will reduce fund flow to private sector during this crisis. Businesses said banks are not cooperating in quick disbursement of money from bailout packages.
The government will borrow Tk 84,980 crore from banks, which is 3.1 percent higher than the previous fiscal. Such borrowing by the government will create liquidity crisis for the private sector.
Shams Mahmud, president of Dhaka Chamber of Commerce and Industry recommended greater allocation for the health sector under the annual development programme (ADP) amid the Covid-19 pandemic.
He suggested cutting corporate tax a bit more so that entrepreneurs could sustain through to the post-coronavirus times.
Mahmud said VAT calculation should be based on the product's value addition or its profit. He also urged for automated VAT return system, simplification of refund system.
He welcomed the government's stimulus to the industries, but urged for advance income tax waiver and waiver of advance tax on RMG, leather, jute and jute goods and agro-processing sector.
Due to lower export orders, the DCCI president said increasing source tax on RMG export from 0.25 percent to 0.5 percent will increase the challenges faced by the sector.
He requested that a reduction in source tax on RMG export be considered, and also welcomed the decision of one percent cash incentive to RMG export.
Mahmud urged for the formation of a high-powered advisory committee for the financial sector under the Bangladesh Bank, which will guide the financial sector amid the pandemic.
He urged for better private sector credit flow and easy access of loan under the stimulus. The budget allows investment of undisclosed money in real estate, stock market, bank deposits and national savings tools.
It will aid in flow of money to the economy through private investment, especially during this pandemic, Mahmud added.
Syed Ershad Ahmed, president of American Chamber of Commerce and Industry in Bangladesh (AmCham) appreciated the government's allocation of budget for technology, but said money needs to be invested in automating the National Board of revenue.
Ershad also said all ports in the country need to be developed -- both infrastructure and management -- for attracting Foreign Direct Investment (FDI). Railway and waterway services for both goods and passengers need to be modernised to ensure adequate supply chain management as well.
Welcoming the decision to reduce corporate tax for non-listed companies from 35 percent to 32.5 percent, Rupali Chowdhury, president of the Foreign Investors Chamber of Commerce and Industry said, "I hope the government will also reduce corporate tax for listed companies proportionately."
The budget has also earned praise from many. Chairman of Nitol Niloy Group Abdul Matlub Ahmad said this is an exceptional budget where the government tried to protect both the economy and low-income people.
Increasing the taxable income ceiling from Tk 2.5 lakh to Tk 3 lakh will help people as this will increase their purchasing power, especially post-coronavirus, Matlub said.
Alamgir Shamsul Alamin, president of the Real Estate and Housing Association of Bangladesh (REHAB) thanked the government for allowing investment of untaxed money in real estate and said it will be a boost for the sector.
However, the budget had its fair share of detractors.
Md Shahidullah, managing director of Metrocem Cement and first vice-president of Bangladesh Cement Manufacturers Association (BCMA) said the minimal reduction in the corporate tax will not help businesses much as they expected at least 10 percent corporate tax cut.
Manwar Hossain, group managing director of Anwar Group and chairman of Bangladesh Steel Manufacturers Association (BSMA) said the reduction in advance income tax in raw material import – from 5 percent to 4.45 -- in the proposed budget for the next fiscal year was very nominal and will create a burden on businesses.
He said the government could have reduce corporate tax to 20 percent in the next fiscal year, considering the impact of the novel coronavirus. Instead, it proposed to reduce it to 32.5 percent from 35 percent.
Manwar also expressed concern over the target in revenue collection as the period following the Covid-19 outbreak will be a difficult one for the economy. But he also mentioned his appreciation for the finance minister as he paid attention to the agriculture sector amid the crisis.
The targeted revenue of Tk 3,78,000 crores will be difficult to collect due to the negative impact of the pandemic on trade, commerce, industries, import, export and other services, said Muhammad Farooq, president of the Institute of Chartered Accountants of Bangladesh.
But there is no doubt the proposed budget is ambitious and involves many challenges in the implementation process. Impediments to on-time implementation of ADP projects should be addressed to achieve the GDP growth target set in the proposed budget, he said.