IBFB calls for widening income tax, VAT net
The International Business Forum of Bangladesh or IBFB has called for the government to widen the value added tax and income tax network, instead of raising the VAT rate to meet the increasing expenditure.
Only 12 lakh taxpayers submitted tax returns in recent years, but there are more people who are financially capable of paying income taxes, the IBFB said.
“A special drive should be launched to increase the number of TIN holders and actual taxpayers,” said Hafizur Rahman Khan, president of IBFB, while sharing his budget reactions at a media briefing at the National Press Club in Dhaka yesterday.
To further develop businesses and investment in Bangladesh, the IBFB chief made some recommendations, including continuation of the package VAT system.
If the VAT rate is increased, small and medium enterprises will be pressurised and consumers will be affected, he said.
Khan opposed the decision to double the VAT package rate, saying the government should set the rate at a reasonable level.
Supplementary duty on steel billet imports rose to 20 percent and VAT to 15 percent, while the tariff value was set at $400 a tonne in the budget. The IBFB said it would push the cost to import a tonne of billet to Tk 12,200 from Tk 7,000 now.
“This will raise the prices of rod, and affect real estate,” Khan said in a statement.
The budget also proposed 30 percent duty and 15 percent VAT on the import of technology products, which will hamper the government's move to ensure cyber security following the hacking of Bangladesh Bank's account with the Federal Reserve Bank of New York.
The association expressed frustration over the budget proposal to withdraw tax exemption for motorcycles. He said this will severely affect the local motorcycle industry, rendering a large number of people jobless.
The IBFB urged Finance Minister AMA Muhith to reconsider the revenue generation target, given the poor collection in recent years.
“Since there is a close link between revenue collection and expenditure, it is essential to achieve the revenue collection target.”
The association said raising the tax at source to 1.5 percent from 0.6 percent would affect the garment exporters.
The IBFB expressed dissatisfaction that a lion's share of the budget would go into non-development activities, rather than into making necessary spending in productive sectors.
In order to accelerate economic growth, the IBFB believes that 45 percent of the national budget should be set aside to implement development programmes.
“Otherwise, the government's vision to attain a middle-income status in the next five years and a developed country by 2041 would be delayed.”
The IBFB praised the proposed budget's emphasis on physical infrastructure development, especially railways, road transportation and power generation, and a higher allocation for education, technology and social safety net programmes.
Khan also expressed frustration over a lower allocation in agriculture. The government's plan to introduce pension schemes at the private sector is one of the significant features of the proposed budget, he added.
Higher revenue collection can make implementation of the annual development programme effective but the revenue target would not be reached unless there is improvement in the climate of overall investment, particularly private investment, and proper ADP implementation, the IBFB said.
The government's plan to collect Tk 38,938 crore from the banking sector to finance the budget deficit will affect private sector investment, it said.
“The cost of loans from foreign sources is low. The government should be more careful in taking loans from the banking channel.”