Ease stimulus conditions for SMEs

The repayment period for loans from the stimulus package aimed at cottage, micro, small and medium enterprises (CMSMEs) should be extended by two years as those firms have been severely impacted by the pandemic, according to speakers at a virtual discussion.

In its budget proposal for fiscal 2021-22, the Dhaka Chamber of Commerce and Industry (DCCI) yesterday demanded that the government ease the terms for the CMSMEs to avail stimulus funds.

The leading business chamber went on to suggest forming a national database of the CMSMEs across the country to ensure transparency in disbursements.

Since firms in the sector face numerous difficulties when availing loans from the stimulus package, the DCCI also urged for the CMSMEs to be given funding with national identity cards being the only required document.

Economists, bankers, businesspeople and senior government officials at the discussion, organised by the DCCI, echoed the same.

"The government should consider mobile financial services (MFS) as a platform for disbursing loans for the CMSMEs as banks fear the risks," said Hossain Zillur Rahman, an economist and former adviser to a caretaker government. Besides, there is uncertainty over the country's economic recovery amid the recent upsurge of Covid-19 infections, he added.

Naser Ezaz Bijoy, chief executive officer of Standard Chartered Bangladesh, suggested easing the conditions and expanding access to credit guarantee schemes for the CMSMEs.

"We need to think about how to protect our very small and small entrepreneurs," said Md Fazlul Hoque, former president of the Bangladesh Knitwear Manufacturers and Exporters Association.

Hoque also asked the government to enable import of all chemicals and equipment required for effluent treatment plants (ETPs) duty-free in the upcoming national budget.

"This would help factory owners feel encouraged to establish ETPs and thereby save the environment," he added.

Md Jasim Uddin, chairman of Bengal Commercial Bank, suggested the introduction of a self-assessment facility and five-year tax holiday for the CMSMEs.

So far, around 68 per cent, or Tk 13,600 crore of the Tk 23,000 crore allocated for the CMSMEs, has been disbursed.

The rate of disbursement in the sector has been slow compared to other stimulus packages, said Masudur Rahman, chairman of SME Foundation.

"About 98 per cent of the fund for the export-oriented sectors has already been disbursed," he said, adding that workers employed by the CMSMEs have witnessed a 10 per cent reduction in wages over the past year.

The SME Foundation chairman also suggested reducing the taxes for light engineering sector, garment accessories and packaging, and motor vehicle spare parts manufacturing as these industries were growing.

In response to these demands and suggestions, Syed Golam Kibria, a member of the National Board of Revenue, said they would consider different tax facilities for the CMSME, agricultural, and livestock sectors in the next budget.

"Next year's target for generating revenue from customs duty will be Tk 100,000 crore," Kibria added.

M Tamim, another former adviser to a caretaker government, said the frequent hikes in energy prices create uncertainty among businesspeople.

Bangladesh will have to depend on primary sources of energy for at least the next 20 years as alternative sources are yet to be readily available in the country, he added.

Moshiur Rahman, the prime minister's adviser on economic affairs, said the tax net should be widened to improve the tax-GDP ratio.

Mustafiz Shafi, editor of The Daily Samakal, demanded the import duty on newspaper materials to be reduced to zero per cent from the existing 5 per cent.

He also asked for a reduction in corporate tax, which currently stands at 32.5 per cent.

Similarly, the DCCI demanded that corporate tax be brought down to a rational level.

The global average of corporate tax is 23.8 per cent while it is 21.13 per cent in Asian nations, the DCCI said in its budget proposal, which was previously submitted to the National Board of Revenue.

The chamber also demanded a gradual reduction of income tax for listed and non-listed companies.

For instance, the chamber asked for income tax to be reduced to 30 per cent from 32.5 per cent in the budget for 2021-22, 27.5 per cent in fiscal 2022-23, and 25 per cent in fiscal 2023-24.

The DCCI also demanded that VAT registration be made mandatory only for firms with turnovers of over Tk 4 crore.

The discussion was moderated by DCCI President Rizwan Rahman.