Frustration over budget
Despite some adjustments with the demands from different sectors, the 2010-11 budget could not appease businesspeople -- be it a large apparel exporter, or a small bread maker.
They say the new budget that was passed in parliament yesterday failed to give them a relief from the tax burden.
The amended budget outlined a gross expenditure of Tk 199,873 crore, including revenue and development expenses, while the net expenditure is Tk 132,170 crore.
The new budget, placed by Finance Minister AMA Muhith in parliament on June 9, has been a much-talked-about issue for the last three weeks, as it proposed to widen the tax-net.
The proposed Tk 6,200 value added tax for each shop at retail level, up from Tk 4,200 in fiscal 2009-10, has seen no change after lawmakers endorsed the budget for the new fiscal year coming into effect today.
The VAT for superstores has been doubled from 1.5 percent, while such tax at import stage has also been raised to 3 percent from previous 2.75 percent. Non-VAT businesses that were under the turnover tax have also been brought under the VAT net.
Such widening of VAT will ultimately impact the consumers badly, according to Humayun Kabir, former president of the Institute of Chartered Accountants of Bangladesh.
However, a renowned economist has pointed out that the tax-net expansion is necessary to get the budget targets implemented.
Meantime, the changes made in the budget include withdrawal of the tax on incomes of the institutional buyers of different government securities like bond, cut in the tax at source to 0.5 percent from the 1 percent proposed earlier for the export sector and VAT at business level to 2 percent from 3 percent.
Besides, the budget also waived 10 percent income tax on beneficiaries of the government's savings certificates, reduced the advance income tax on stockbrokers' commission to 0.05 percent from the proposed 0.10 percent. The existing such tax is 0.025 percent.
Abdus Salam Murshedy, president of Bangladesh Garment Manufacturers and Exporters Association said they are not satisfied with the budget.
“It is self-contradictory when the government is awarding us stimulus, it imposes higher taxes,” he said.
The loss is a two-way one: while energy crunch leads to a less output, the global recession drives out the market competitiveness of the RMG sector, Murshedy said.
He demanded that the government keep unchanged the tax on exports at the previous 0.25 percent.
Abdul Hamid Sharif, former secretary general of the Bangladesh Reconditioned Vehicle Importers and Dealers Association, said the price of a car between 1,000 cc to 1,500 cc will rise by Tk 2 to 3 lakh because of the 15 percentage points increase in supplementary duty.
Mohammad Jalal Uddin, president of Bangladesh Bread Biscuit and Confectionary Manufacturers Association, said the imposition of 15 percent VAT on handmade bread and biscuits will hit hard the labour-intensive industry.
Mobile phone operators are disappointed to see the SIM tax unchanged at Tk 800.
However, Shakil Rizvi, president of Dhaka Stock Exchange, thanked the government for reducing the tax on stockbrokers' commission.
Mustafa K Mujeri, director general of Bangladesh Institute of Development Studies, said the changes made yesterday were nothing but a marginal adjustment of demands.
The BIDS boss also pointed out that the tax-GDP ratio is one of the lowest in the world. “There is an urgent need of widening the tax -net to carry out the government's budget pledges.”
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