The Financial Express

Tap money mkt to finance budget deficit

ICAB tells govt, backs legalising undisclosed income

FE file photo FE file photo

Accountants have advocated financing the deficit in the budget for fiscal year 2020-21 from the money so that credit to the private sector cannot be squeezed.

"We expect that government will finance the deficit from the money market without reducing the credit flows to the private sector," the Institute of Chartered Accountants of Bangladesh or ICAB said in a statement on Thursday.

"Revenue as targeted at Taka 3.78 trillion will be difficult to collect due to the negative impacts of the pandemic on trade, commerce, industries, import, export and services," the institute said.

The chartered accountant professionals said the proposed budget is ambitious and involves lot of challenges in the implementation process.

The ICAB said impediments to the timely implementation of ADP projects should be addressed for achieving the target of GDP growth set in the proposed budget.

It appreciated the proposed budget of FY 2020-21 for prioritising health, agriculture, social safety-net and job creation needed to cushion the blow from the ongoing public health emergency.

It said corporate tax rate has been reduced from 35 per cent to 32.5 per cent, which will give relief to local companies and promote industrialization and foreign direct investment in Bangladesh.

The threshold for tax-free income has been raised to Tk 0.3 million from Tk 0.25 million for individual taxpayers and a 5.0 per cent tax slab has been introduced instead of existing the 10 percent. The highest tax slab has also been reduced to 25 per cent from existing 30 per cent.

The ICAB said the new threshold for individual tax and the highest tax slab will give a relief to low-income people and encourage taxpayer to disclose the actual income, which will boost the country's image and global ranking to attract FDI, ultimately bringing the positive impact on revenue collection and employment.

In view of the current unusual situation, as an extraordinary measure, "We find the rationale behind widening the areas of investment for undisclosed income by paying taxes at the lower rate," the ICAB said.

"We expect that this extraordinary measure will not be continued beyond the stipulated year."

The ICAB appreciated the provision for imposition of penalty on mis-invoicing at the rate of 50 per cent on the amount of the difference.

However, it will require judicious application, in view of the fact that normal business transactions are not arbitrarily-valued for the imposition of such penalty," it said.

ICAB welcomed the budget proposal of reducing AT from 5.0 per cent to 4.0 per cent for importing materials for the production purpose and the extension of time limit from two to four months to claim both input VAT rebate and decreasing adjustment of AT.

It said amendments allowing businesses to claim 80 per cent of VAT rebate on VAT paid on transportation bill and to claim input VAT rebate for utility bills like WASA, DESCO, Titas etc without Mushak 6.3 are also business-friendly move.

This will reduce the cost of businesse, it said.

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