The Metropolitan Chamber of Commerce and Industry yesterday joined the chorus of grievance among businesses over the government's move to slash corporate tax only for the financial sector in fiscal 2018-19.
“It is disappointing,” said Nihad Kabit, president of the MCCI, while moderating a seminar on the incoming fiscal year's budget announcement, held at the chamber's office in Dhaka.
Finance Minister AMA Muhith in his budget speech for fiscal 2018-19 proposed a cut of 2.5 percentage points in corporate tax for banks, financial institutions and insurance companies.
As a result, from July 1 listed financial sector companies will pay corporate tax at 37.5 percent and non-listed ones at 40 percent.
The rest of the businesses will continue to pay corporate tax at 35 percent or higher.
“Therefore, to say our corporate tax is low compared to the region is not factually correct. To use that basis for not reducing the corporate tax is disappointing.”
Kabir also said there is no alternative to raising the level of private investment including foreign direct investment if Bangladesh is to confirm the status of developing country by 2021.
Policy reforms, simplification of taxation system, business friendly policies, enabling business climate, policy continuation, ease of doing business, incentives, reduction of taxes and inclusive policy planning also need to be prioritised.
MCCI feels that attaining the increased revenue target for fiscal 2018-19 will continue to be a major challenge even though the number of taxpayers has increased.
In order to achieve the revenue target, MCCI strongly suggests tax compliant enterprises should not be excessively burdened. Instead, new avenues of tax collection should be identified and pursued.
Implementing the proposed budget would be challenging for the government because of the low inflow of both private investment and foreign direct investment, said Ahsan H Mansur, executive director of the Policy Research Institute.
Still, the private investment to the GDP ratio is 23 percent, he said.
In fiscal 2018-19, based on the 7th five-year plan, Bangladesh will require private investment of 25 percent of GDP, including 1.8 percent from FDI.
“This is unlikely to be achieved.”
Despite ambitious targets in every budget, the tax-GDP ratio hovers around 9 percent, which is the lowest among all the possible comparable countries, Mansur added.
In the proposed budget, the ceiling for individual tax-free income has not been raised with a view to bringing many young professionals under the tax net, said Md Mosharraf Hossain Bhuiyan, chairman of the National Board of Revenue.
At present, a person having a monthly salary of Tk 16,000 will come under the tax net.
The corporate tax rate has been reduced only in the banking sector so that the government can put pressure on bankers to reduce the interest rate to lure in much-needed investment, he said. “However, we will do more exercises on the corporate tax issue.”
The NBR chairman hinted that he might revise the tax on supermarkets. Bhuiyan said he will automate VAT collection by introducing electronic fiscal devices within the next one year to check VAT evasion.
Zaidi Sattar, PRI chairman, suggested the government should further liberalise trade as some industries could not grow despite enjoying protectionism for years. Adeeb H Khan, senior partner of the KPMG, also spoke.