The Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) has welcomed the budget for the fiscal year 2014-2015 saying the Finance Minister has correctly identified the challenges facing the country's economy.
The chamber, in a reaction on Friday, found the budget to have been framed in the backdrop of recovering global economic recession, reducing of tax incidence of non-listed companies and delivery of wide range of social safety measures aimed at improving the economic condition of the people.
The significant allocations made for the Padma Bridge project, the Metro Rail project, i.e., transport, human resources development including education, rural economy, healthcare, local government, women employment, social safety net, power and energy, are commendable, the MCCI said.
The MCCI strongly felt that the increased investment in physical and social infrastructures would help improve quality of investment, people's living standard develop human resources and create better employment opportunities.
The widening of social safety net programmes are fully justified, the chamber said adding that the Finance Minister has given more attention to special economic zone, education and energy and power.
The MCCI has expressed its happiness that special attention has been given to transport and vocational education.
The MCCI is also happy to note that communication and transport sector has been given the largest share in the budget, i.e., an allocation of Tk. 244.64 billion out of the total outlay. An amount of Tk.81 billion has been earmarked for the Padma Bridge project, a press release issued by the MCCI said.
"We strongly recommend that in utilising the allocation, higher priority should be given to primary and secondary education and skill development, "the MCCI statement said.
The MCCI noted that power and energy sector has been given allocation of Tk. 115.40 billion and the infrastructure planning, water supply and housing has been given Tk. 177.19 billion, and the agriculture Tk. 191 billion.
The MCCI said the GDP growth target has been raised to 7.3 per cent. "We strongly feel that as the time progresses, this should be raised to 8 per cent as the economy has started showing encouraging signs."
The MCCI felt that financing and implementing of the coming year's budget will be the two major challenges "as we have seen that the government did not achieve revenue target set for the current fiscal year."
The budget's net outlay is Tk. 2505.06 billion of which, 59.8 per cent will come from tax revenue, 11.05 per cent from non-tax revenue and 9.7 per cent from foreign loans and grants, leaving the gap of 19 per cent to be made from domestic sources. Borrowing from banking system will be the main component. This projected borrowing will be significantly higher compared to the last year's budget.
"We strongly feel that there must be a cap on the government's borrowing from the banking sector. We feel that the concept of PPP remains under-utilised and through its proper implementation, private sector investment can be mobilised, " the MCCI said.
The chamber said human resources development, being a pre-requisite for the country's progress, should be a top priority, specially, vocational, technical and skills development, for efficiently using our workforce in trade and industry and export of manpower.
The MCCI termed as a good step the proposed imposition of surcharge of 1 per cent on industrial unit which will fail to set up effluent treatment plant. "It will encourage establishment of green industries in our country."
The budget focuses on high growth rate in GDP, export, import, remittance and investment. However, special attention needs to be given to specific measures to contain inflation, the chamber said.
Increase of national savings is a pre-requisite for investment and development of trade and industry. "We have not seen adequate measures in the budget for encouraging savings, " it said.
The MCCI welcomed the budget proposal to reduce the corporate tax rate of non public traded company which was its long-standing demand. However, withdrawal of tax rebate of 10 per cent for listed companies which declare more than 20 per cent dividend is disappointing, the chamber said calling for its restoration.
Reduction of tax rate from 0.5 per cent to 0.3 per cent of turn over has been welcomed.
The MCCI also welcomed the budget proposal to enact the new VAT Act and Supplementary Duty Act from July 2015.
"While we appreciate progressive proposals placed in the budget, we are concerned with the implementation of these proposals. The monitoring and implementation mechanism needs to be strengthened and enhanced significantly in order to achieve the proposed ambitious growth in the economy."
The MCCI said extension of tax holiday up to 30th June 2019 is a commendable step.
Tax exemption facility for 5 years for de-mutualised stock exchanges with a view to maintaining stability in capital market is a good step and enhancement of tax exemption limit on dividend income from Tk.10,000 to Tk.15,000 is appreciated, the MCCI said in the statement.
"We feel that in life insurance, the deduction of income tax of 5 per cent on the total sum payable to the insured in excess of premium paid is unreasonable and should be withdrawn, " the chamber demanded.
Raising of tax exemption limit of agriculture income from Tk.50.000 to Tk.2,00,000 is also a good step, it said.
"Reduced rate of deduction of tax at source on cash incentive from 5 per cent to 3 per cent and tax deduction rate at source on garments export from 0.80 per cent to 0.30 per cent is very encouraging and the deduction rate on all other exports from 0.80 per cent to 0.60 per cent are bold steps."
Tax exemption on interest income from investment in pensioner savings certificate and wage earner's bond up to Tk.5,00,000 is a good step, the chamber said.
It said raising the expenditure limit of tax exemption from Tk.80 million to Tk.120 million for activities under CSR is also a good step. However, the eligibility should be well-defined.
The MCCI has been disappointed that the allocation for agriculture is only Tk.191.00 billion or 7.6 per cent of total budget, which may hinder production in agriculture. Any significant growth of economy is inconceivable without high and sustainable growth of the agriculture sector and hence, it deserves high priority in budget allocations, it observed.
The chamber welcomed the proposed step for automation of Government administration, thereby improving efficiency, transparency and service delivery.
The MCCI appreciated the introduction of on-line income tax return submission system from January 2015, which will help the tax-payers to pay tax without hassle. In this system, the tax-payers will be able to pay tax on-line without visiting tax office.
Creation of fund of Tk.500 million for skill development and Tk.500 million for development of haor areas and Tk.500 million for development of char areas are commendable steps.
The MCCI welcomed tax holiday facility on pollution free HHybrid Hoffman Kiln (HHK) brick fields.
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