Job hardly got any focus
The proposed budget should have had more focused indications on the recovery of jobs lost directly and indirectly for the pandemic alongside the generation of new ones, according to a leading business chamber.
The budget should have also focused more on the retention of existing jobs in the labour market, said the Metropolitan Chamber of Commerce and Industry (MCCI) in its reaction on the proposed budget for fiscal 2020-21.
The chamber appreciated the priority the finance minister put in allocations for agriculture, food security and healthcare and expansion of the coverage of social safety net programmes.
The MCCI also underscored the need for measures to create livelihood opportunities for expatriate Bangladeshis who have been forced to return from abroad. Making the workforce skilled and low-skilled is important, the chamber said.
Unfortunately, in a crisis, the weaknesses in governance and management capacities have been bluntly brought forward, particularly in the healthcare sector.
Fiscal management would be a difficult job for the government due to a slowdown in business for the pandemic.
Revenue mobilisation will also be a daunting task, given the various tax concessions and administrative forbearance that will have to be allowed to individuals and institutions in these very difficult times.
Ultimately, tax compliant enterprises are likely to face severe pressure from the tax authority, the MCCI said, advocating for structural reforms in the tax administration.
In light of the disruptions already caused to the economy and possible further disruptions, the budget deficit may turn out to be greater than what was targeted.
Tightening of the financial management will yield a significant amount in savings if unnecessary over-spending, wastage and other leakages of funds can be stopped.
The MCCI also said an ambitious revenue target may also distract the government's attention from trying to obtain as many low-cost funds as possible from multilateral and bilateral development partners or pursuing innovative solutions such as the issuance of bonds.
The chamber strongly urged the government to use its diplomatic strength to pursue every potential source of funding being made available internationally for coronavirus-affected countries to reduce pressure on domestic resource mobilisation and keep the budget deficit duly funded.
Bank borrowing should be very carefully implemented so that the impact of crowding out does not further depreciate the already historically low private sector credit growth.
The finance minister may find it difficult to meet the bank borrowing target unless there is adequate money supply in the system.
It must be recognised that banks would bear a significant burden in rolling out the Tk 101,117 crore-stimulus packages as well as a possible uptick in default loans due to genuine financial difficulties caused by the pandemic.
Bangladesh Bank will need to work closely with banks, some non-bank financial institutions and effective non-governmental organisations as well as other stakeholders to ensure that the allocated funds reach the hands of the cottage, micro and small enterprises, for which the current regulations are too cumbersome to comply with.
The chamber appreciated the allocation of Tk 205,145 crore for fiscal 2020-21's annual development programme (ADP).
It is 1.20 per cent higher than the original allocation for the current fiscal year (Tk 202,721 crore) and also 6.34 per cent higher than the revised ADP (Tk 192,921 crore).
The MCCI appreciated the reduction in the corporate tax rate for non-listed firms from 35 per cent to 32.50 per cent and said it was the first move in the right direction.
The high corporate tax rates for non-listed companies, which make up the bulk of corporate entities, coupled with the tax on dividends, makes Bangladesh an unattractive business destination compared with neighbours in the region.
"We trust that over the next several years, this trend to lower the corporate tax will continue."
The proposed budget, however, kept the corporate tax rate unchanged at 25 per cent for publicly traded companies.
The MCCI expressed deep concerns about allowing the indiscriminate opportunity of whitening black money by paying only 10 per cent tax.
"We have seen in the past that such opportunities to whiten black money have not yielded much results while unnecessarily raising questions about the probity of our financial and accounting practices," said Nihad Kabir, president of the MCCI, in the statement.
The cost-benefit analysis will show a higher cost and almost no benefit. This will seriously discourage compliant taxpayers and, in fact, be seen as if to be penalising them.
If at all, it should only have been allowed to those whose income is from legal sources but for some reasons remained undisclosed.
Again, the opportunity should have been given to investment in specific sectors only such as for employment creation and enhancing social safety net, innovation and technology transfer.
Allowing the entry of black money into the stock market may open up new problems for an already weak capital market.
More importantly, allowing deposit of such money into bank accounts may bring Bangladesh's banks into contravention of international money laundering laws and norms, thereby preventing them from interacting with international banks, which will be extremely detrimental to the economy.
The deposit of such funds into bank accounts without any explanation should not be permitted, the country's oldest chamber added.
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