Concentrate more on keeping food prices low

Keeping food prices low should be seen as a strategic objective of the National Board of Revenue (NBR) during the preparation of the next national budget, the Centre for Policy Dialogue (CPD) suggested in its budget proposal.

Food security of low-income people during the period of uncertainties of the coronavirus outbreak should be seen with utmost importance, the think-tank said.

Reduction of import related tariffs on essential food items should be considered on a dynamic of basis based on the evolving market conditions in terms of price, supply situation and projections about production, it said.

Every effort should be taken to create fiscal space by taking appropriate measures to deal with tax evasion, tax avoidance and illicit financial outflows, as the government is under immense pressure to pursue an expansionary fiscal-budgetary stance, according to CPD. 

Maximum effort should be deployed to raise efficiency of the tax administration and efficacy of tools.

The NBR will need to raise its institutional capacity and enforcement ability through reforms and concrete actions on the ground.

For the upcoming budget, a viable completion timeline should be chalked out for reforms which are already under consideration, the CPD said.

Broader use of technology may bring forth some uptick in revenue mobilisation efficiency. The CPD urged the NBR to introduce an e-TDS system to this end.

This system will enable the NBR to issue tax certificates against an e-TIN linked to the "tax-deducted-at-source (TDS)" collection system. "This will make evasion of the TDS difficult."

The centre suggested that the existing black money whitening facility through voluntary disclosure of undisclosed income be not continued from next fiscal year.

The planned procurement and installation of devices like electronic fiscal devices must be accelerated in order to ensure effective implementation and augment revenue.

The NBR should eliminate all hurdles with regard to registration and getting BINs, updating information, installation of devices and submission of returns.

The NBR could identify and pursue individuals and business entities who are registered in the system but do not submit tax returns and who are registered and submit returns but do not effectively pay taxes.

A mechanism could be set up to contact the relevant entities via phone calls, SMSs or emails to follow up on their return submissions or tax payments.

The NBR should launch a comprehensive online payment system for VAT, income tax and customs together with an interface with iBAS++.

The revenue board must be restrained from all ad-hoc provisions of tax incentives. It needs to be selective in the next fiscal year as more demand for incentives will be lined up in the wake of COVID-19.

Proper cost-benefit analysis must be conducted in case of new provisions. At the same time, some of the existing provisions should be reviewed and discontinued if deemed as of low priority.

The next budget should particularly focus on few of the activities under the National Strategy for Prevention of Money Laundering and Combating Financing of Terrorism, which are scheduled to be implemented by June 2021.

The NBR should emphasise the need for a comprehensive database on expatriates working in Bangladesh. Their income and outward remittance must be included in the database to address the issue of wide-ranging tax evasion, the CPD said.

To this end, the NBR, special branch of police, National Security Intelligence, Bangladesh Investment Development Authority, Bangladesh Export Processing Zones Authority and NGO Affairs Bureau must devise a collaborative mechanism to cope with the problem, it said.

The NBR may consider waiver of VAT at the domestic stage for the March-June period this year for the agro-based industries, which were affected the most due to the spread of the coronavirus.

It may also introduce facilities allowing deferred payment of quarterly advance income taxes until June this year and payment of corporate taxes for fiscal year 2019-20 by instalments until March, 2021.

These waivers could be continued in fiscal year 2020's budget, the CPD said.

"Besides, companies which are in loss-making position during fiscal year 2019-20 may be allowed to 'carry back losses' against the taxable profits for the two previous years: fiscal year 2017-18 and fiscal year 2018-19."

Farmers producing perishable goods were affected by a drop in sales, low market price and disruptions in the movement of goods to wholesale markets, the CPD said.

There is limited scope to address the challenges faced by these farmers through fiscal measures, it said. "Best way to go will be to provide them with low-interest credit facility before the next planting season."

The NBR may consider following a 'go slow' policy with regard to incentivising labour-displacing mechanisation, the CPD suggested.

Further reduction of duties at import stage for agricultural machineries should be stalled perhaps until fiscal year 2021-22.

Similarly, disbursement of credit at subsidised rate to farmers for agricultural mechanisation should be slowed down in the next one year, the think-tank recommended. 

Manufacturing enterprises are being affected differently and in different degrees depending on type of the activities, size and locations. Most are being adversely affected because of disruptions in the supply chains and demand depression.

The CPD believes the coverage of the Tk 5,000 crore package for export-oriented industries should be broad-based and it should include enterprises exporting below 80 per cent of their production.