Make new VAT law business-friendly
Leading business associations yesterday urged the government to ensure easy, hassle-free and business-friendly implementation of the new VAT law.
The business community welcomed the introduction of the new law, but also expressed concern that they may get harassed if the four VAT rates mentioned in the new law are not implemented properly.
The budget for 2019-20 placed on Thursday proposed slapping three more VAT rates -- 5 percent, 7.5 percent and 10 percent -- along with the current 15 percent which was introduced in 1991.
Metropolitan Chamber of Commerce and Industry (MCCI) yesterday said it was looking forward to see the government ensure the new VAT regime didn't increase the complexities of running businesses.
The leading trade body also demanded that the government took steps so that taxpayers did not get harassed for minor lapse in the compliance of VAT provision.
The Foreign Investors' Chamber of Commerce and Industry suggested government allow the companies time to adjust with the new law.
"Therefore, the chamber strongly recommends for allowing at least six months for implementation of the same which has not been considered in the proposed Finance Bill, 2019," the club of multinational companies operating in Bangladesh said in its reaction.
Similarly, Dhaka Chamber of Commerce and Industry (DCCI), Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Chamber of Industries and Chittagong Chamber of Commerce and Industry also urged the government to ensure that no one is harassed during the implementation of the law.
The MCCI thanked the government for focusing on education, training, infrastructure development and planned urbanisation.
However, the MCCI opined that it would be a major challenge for the National Board of Revenue to reach its revenue collection target of Tk 325,600 crore, which is 16.29 percent higher than the target of Tk 280,000 crore set in the outgoing fiscal year.
"The MCCI is concerned that this will put excessive pressure on the tax payers," said a statement.
It also lauded the government measures for introduction of one stop services, ease of doing business and proposal of formation of a commission for brining disciplines in the banking sector.
But much like other associations, the MCCI is disappointed that the government did not propose to slash the corporate taxes.
"The MCCI is alarmed that tax has been proposed on retained earnings in excess of 50 percent of paid-up capital. Imposition of tax on equity is wrong in principle. Also retained earnings is made up of taxed income, therefore this is double tax on the same income.
"This will discourage capital creation and reinvestment. We strongly urge the government to reconsider this proposal.
"The MCCI is disappointed to note that neither the tax rates for individuals have been reduced, nor has the tax-free threshold been increased. This threshold has not been changed for the last four years in spite of annual inflation of at least 5 percent."
However, it appreciated the initiative of rejuvenating the stock market and thanked the government for putting a fund of Tk 100 crore for startups.
The FCCI said, "The Finance Act, 2017 had a bold provision of withdrawing withholding tax on the supply of direct materials. Unfortunately, tax has been proposed on direct materials, which will be detrimental to industrial growth.
"The chamber supports the vision of digitalisation of Bangladesh. However, the proposed increase of SD, minimum income tax and SIM tax on telecom services will contradict the said vision."
The garment workers should be included in the government's allocation of Tk 74,367 crore for social safety net programme, BGMEA said in a statement.
The proposal of allocation of 1 percent cash incentive on garment export receipt is inadequate for the sector, the BGMEA said.
DCCI President Osama Taseer said the government would take about Tk 47,364 crore from the banks, but because of this borrowing, private sector credit flow should not be hampered.
Private sector credit flow in the last fiscal year was 12.5 percent although 16.5 percent credit flow was targeted, according to the monetary policy.
According to Bangladesh Bank, non-performing loan (NPL) is Tk 110,873 crore. Some 48 percent of the NPL is from the government banks.
But the budget indicates that from now on, this NPL will not be accelerated more which is very much appreciable, the DCCI said.
It also hailed the decision of forming "Insolvency and Bankruptcy Law".