Bangladesh:Expectations from budget go high

Numerous proposals on duties, taxes, VAT put forward in pre-budget consultations

Like every year, the government held pre-budget consultations this year with trade bodies, NGOs and think-tanks before preparing the national budget for 2009-10 fiscal year that is being announced today.
In course of those pre-budget parleys that staggered for nearly two months, representatives of trade bodies, NGOs and think-tanks have put forward numerous proposals on duties, taxes, VAT, special allocations and other facilities to the finance minister, planning minister and the chairman of National Board of Revenue.

FBCCI

Though the Federation of Bangladesh Chambers of Commerce and Industry, the country’s apex trade body, put forward the proposals for the business community as a whole, most of the trade associations held separate consultations to place their proposals.
On May 13, the FBCCI put forward some 411 proposals in three major areas – import duty, value added tax and income tax.
FBCCI hoped that the next budget should be business-friendly and help create employment, generate wealth, boost production and reduce poverty.
They also suggested that the government should provide opportunity to bring undisclosed money into the formal sector to increase investment, specially industrial investment, and generate employment.
The apex trade body felt that the duty structure should be revised downward for capital machinery and basic raw materials and intermediate raw materials which are not produced in the country.
They proposed reduction of import duty on capital machinery and basic raw materials from the existing 3 per cent to 1 per cent and on intermediate raw materials from 7 per cent to 5 per cent. Import duty on essential commodities should be 12 per cent and on luxury items 25 per cent.
The federation’s other duty-related demands include continuation of zero tariff on import of foodstuff, cotton, medicine and fertiliser, development of a product-based price database, reconstruction of review committee and specific duties on import of metal products and chemicals.
FBCCI suggested that small industrial units should be brought under VAT network.
Cottage industry should be brought under sub-contracting and for expansion of SMEs, capital should be increased to Tk 25 lakh from Tk 15 lakh and turnover to Tk 50 lakh from Tk 24 lakh.
About income tax, FBCCI proposed that the ceiling of tax-free personal income should be raised to Tk 2 lakh from existing Tk 1.65 lakh. They want 10 per cent tax on Tk 3.5 lakh income, 15 per cent on Tk 4.5 lakh, 20 per cent on Tk 6 lakh and 25 per cent on the amounts above.
The limit of tax-free income should be Tk 3.60 lakh and Tk 4.5 lakh for female taxpayers, senior citizens and the disabled from its existing level of Tk 1.8 lakh.
Corporate income tax should be fixed at 25 per cent on manufacturing companies which earn less than Tk 1 crore net profit and 30 per cent for those which have over Tk 1 crore net profit. The current tax rate is 37.5 per cent irrespective of net profit earnings.
For financial institutions, those which lend more to industry, agriculture, export, energy and infrastructure sectors should be taxed at 30 per cent rate instead of present rate of 45 per cent.
FBCCI proposed that tax holiday package should be a permanent tool to provide incentive to new industries.
They also urged the government to fix the revenue earning target at Tk 55,000 crore in the coming budget.
The federation has demanded establishment of a fund for mitigating the effects of financial crises and single digit bank interest rate.

BGMEA

Bangladesh Garment Manufacturers and Exporters Association asked for 10 per cent cash incentive for readymade garment exporters and scrapping of the provision of taxes at sources.
They also called for rescheduling of term loans of 3 and 5 years to 7 and 10 years, reduction in interest rate to 7 per cent from over 15 per cent, withdrawal of VAT from RMG sector and subsidy for diesel.

MCCI

The proposals of the Metropolitan Chamber of Commerce and Industry include reduction of corporate taxes for non-listed companies from 37 per cent to 35 per cent, continuation of tax holiday and easing of supplementary duties on raw materials and components.

DCCI

The Dhaka Chamber of Commerce and Industry has demanded that the government come up with a bailout plan for the RMG sector. It also sought subsidy on the imports of capital machinery and industrial raw materials.

BTMA

Bangladesh Textile Mills Association demanded 15 per cent cash incentives to make up for the losses incurred due to the current global recession.
The BTMA leaders also demanded a two-year moratorium on bank loan interests and sought a research and development fund, equivalent to 6 percent of export earnings from the RMG, textiles and other manufacturers.
Bangladesh Textile Mills Association demanded for counting the tax holiday from the date any factory goes on production. They also asked for PSI waiver for import of capital machinery and spare parts for export-oriented industries.

SME Foundation

The Small and Medium Enterprise Foundation put forward a proposal to the government to increase the exemption ceiling of value added tax on fixed investment and income tax on the turnover for the SMEs.

REHAB

Real Estate and Housing Association of Bangladesh has asked for a Tk 1,000 crore Bangladesh Bank fund to be disbursed as loans through the commercial banks.

Bangladesh Jute Association

Bangladesh Jute Association has urged the government to waive all taxes, including VAT on export of raw jute.

Bangladesh Frozen Food Exporters Association

Bangladesh Frozen Food Exporters Association demanded government intervention in getting interest-free ‘block loans’ for five years as they were facing a liquidity crisis. They also demanded raising cash incentives on exports from 10 percent to 20 percent to meet their financial problems to some extent.

CPD

The recommendations put forward by the Centre for Policy Dialogue, a private think-tank, include increase of threshold of tax-free income to Tk 1.85 lakh from Tk 1.65 lakh, withdrawal of Tk 5 lakh in annual renewal fees for captive power generators, imposition of 15 per cent duty on import of rice in view of higher domestic production, revision of tariffs on finished goods upward, especially on luxury goods and increase of retirement age for government employees from 57 to 60.
Some leading NGOs want to see reflection of Awami League’s election manifesto in the coming budget. They asked the government for giving special emphasis on health, education, power and jute sectors. They also sought special allocation for marginal people.

BKMEA

Bangladesh Knitwear Manufacturers and Exporters Association sought a 10 percent cash incentive for knitwear exporters.

Unnayan Shamunnay

Unnayan Shamunnay, a private research organisation, called for imposing higher taxes on tobacco products through which, they said, the government could earn Tk 950 crore additional revenue per year.

SUPRO

SUPRO, an alliance of NGOs, asked the government to increase subsidy in agriculture and ensure that the subsidy goes to the farmers.
Bangladesh Insurance Association
Bangladesh Insurance Association urged the government to separate them from the category of financial institutions like banks.

Others

At a pre-budget consultation organised by Economic Reporters Forum, AB Mirza Azizul Islam, the finance adviser of the immediate-past caretaker government, gave opinion in favour of imposing duty on all products but food items. The finance minister, Abul Maal Abdul Muhith, was present at the meeting.
Editors of the national dailies and electronic media recommended exemption of 15 per cent VAT on newsprint and expansion of social safety net. They said if legalisation of undisclosed money is needed, there should be a penalty provision, otherwise it would be unjust to the real taxpayers.
Leather industry leaders have sought a 25 per cent cash incentive from the government to boost leather production. They urged the government to reduce the bank interest rate on loans intended for leather production.
Plastic goods manufacturers have demanded withdrawal of the statutory regulatory order (SRO) on ‘import under bond not for sale’ and the provision for bank guarantee required for the import of plastic raw materials. They also demanded fixation of 3 per cent tax on the local plastic industry.
The light engineering sector has demanded that the government allocates funds for it in the new budget and ensure easy access to finance for its infrastructure development and upgrading technologies.
Leaders of pharmaceutical sector demanded VAT waiver on sample medicines and sought more budgetary support from the government to develop the sector.
Representatives from the computer, ICT and telecommunications sectors sought a total duty waiver on computers and computer accessories, which are still too expensive for the common people to afford. They have also asked the government to consider VAT waiver on internet users.
They suggested imposition of higher taxes and supplementary duties on the import of software which the local software manufacturers are producing.
Leaders of food and beverage industries have proposed that the NBR should impose supplementary duty on the import of food items which are produced in the country.
Representatives of the sectors like hotel, restaurant, guesthouse, travel agents and cable operators have also sought budgetary provisions benefiting their respective business.

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Source: Newage