No scope for ambitious budget
A minister says, as businesses stress inflation, energy management
Dealing with the pressure of inflation while maintaining the growth momentum will be main focus of next budget, government policymakers said Wednesday as businesses suggested taxation reforms and incentivizing economic activity.
Prominent business leaders at a pre-budget meet urged the government to simplify tax system as well as widen tax net rather than burdening existing taxpayers for meeting increasing demand for revenue.
The entrepreneurs called for specific policy changes in the budget for complete automation of taxation along with separation of policy and tax authority.
They demanded elimination of red tape to simplify business procedures in the budget for 2023-24 for facilitating the growth of trade and investment.
They also sought fiscal assistance from the government as many sectors, particularly the cottage, micro, small and medium enterprises, require financial succour to overcome the effect of the economic slowdown worldwide.
The businesses said the upcoming budget should be formulated keeping mind growing inflation and effect from the global situations, including the Russia-Ukraine war.
The pre-budget discussion was organised by Dhaka Chamber of Commerce and Industry (DCCI) and Bangla daily Samakal at the Bangabandhu International Conference Centre in Dhaka.
Speaking at the meet, Prime Minister's Private Industry and Investment Adviser Salman F Rahman said everyone should pay tax or else tax net will never be wider at the expected level.
"We always talk about tax-net increase, but small businessmen don't want to pay tax," said Mr Rahman, who owns a big business house.
He wonders how the tax net will increase if everyone is not netted for tax payment.
"Business is profiting, but where is the problem of paying taxes? Where will the tax come from if exempted everywhere?"
He said there is no alternative to automation to increase tax receipt and GDP (gross domestic product).
Mr. Rahman, a former chief of Bangladesh's apex trade body, FBCCI, pointed at some structural flaws in taxation, one being dependence on indirect taxes.
"The volume of indirect taxes should be reduced--we have to increase direct taxes."
And the dependence on customs is high for revenue collection, so it should also be reduced, he suggests.
"If the VAT law could have been implemented in 2014, then there would not have been so many questions about this sector. The tax law should be simplified."
He said inflation is a global problem, it will go away gradually.
The PM adviser mentioned that many feared in June last the reserves would go out of control, Bangladesh would become Sri Lanka, the IMF would not lend etc.
By June this year, caps on interest rate would go, there will be market-based exchange rate and many other things would be sorted out, he told his audience about an economic rebound on steam in the country.
He admits that there challenges in macroeconomics. "But we are on the right track," he said, adding that the country has been able to maintain stable position due to agriculture, expatriate income and export sector.
Salman F Rahman feels that bond market should be prioritised to strengthen the capital market.
State Minister for Planning Shamsul Alam told the meet that the collapse of Silicon Valley Bank, a large financial institution in a developed economy like the United States, triggered new fears in financial system across the globe.
The actions that the American government takes will have some domino effects outside.
"Usually, we see, when America coughs, the whole world gets a fever. In short a new challenge has been added to already-critical economy," he said.
The junior minister in planning gave an outlook of the upcoming budget for the fiscal year 2023-24. The main goal of this year's budget will be to deal with the pressure of inflation.
"There is no scope for giving an ambitious budget," he said, adding that much attention is being paid to ensuring that the budget deficit is not too high.
However, while doing these things, it is being carefully taken into consideration in the next budget so GDP is not reduced.
Although the overall economy of the country is under some pressure, he said, remittances are increasing and foreign-exchange reserves also have increased.
Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) President Jasim Uddin, in his address, expressed the hope that there would not be any tax on fuel as it is a raw material used for production.
He urged the government to separate tax authority and the policy wing-in order to bring accountability in taxing and revenue receipt.
"NBR should not take policy decisions at the same time it collects tax," the apex trade-body chief said.
He said capacity of the NBR should be strengthened and their offices should be expanded across the country to increase tax volume.
Former FBCCI President Shafiul Islam Mohiuddin questioned why the NBR can't create their leader from within the revenue board. He thinks such leaders can contribute to increase in tax-GDP ratio.
He urged government high-ups to provide utility connections for new businesses to facilitate industrialisation and growth.
Another former FBCCI president, AK Azad, said the government should be prepared from now how they would meet energy demands when the reserve of local gas dries out within few years.
He points out that 'red-tape' and high tax rates create obstruction in finding alternative energy sources, including solar plant.
DCCI President Sameer Sattar moderated the discussion, held in the run-up to the next national budget.