Budget proposes fresh tax burden on honest taxpayers

The proposed tax measures for upcoming fiscal year (FY) would enhance tax burden on honest taxpayers while expansion of tax-net to new potential areas has got less priority in the budget, business leaders said at a discussion Sunday.

They said the proposed super tax and upward revision of wealth tax will be imposed on assets that taxpayers acquired by investing their tax-paid income.

Their observations came at a discussion on 'Budget 2014-15: Views of Business Community', jointly organised by the Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka and the Policy Research Institute (PRI) at the chamber building in the city.

State minister for ministry of finance and planning ministry MA Mannan was the chief guest in the programme while former Finance Adviser to the caretaker government Mirza Azizul Islam was special guest.

At the programme, PRI Chairman Dr Zaidi Sattar discussed implications of policy and economic impact of the 2014-15 budget.

PRI Executive Director Dr Ahsan H Mansur presented a keynote paper on 'Budget FY 15: Macroeconomic setting, lessons from FY 14 budget execution, and implementation challenges".

MCCI president Rokia A Rahman delivered the welcome speech and appreciated most of the budgetary measures as 'business-friendly'.

In the programme, the MCCI leaders demanded cut in corporate tax for banks and financial institutions, withdrawal of minimum tax on companies' gross receipt, review of collection process of land tax and urged the tax authorities not to collect income tax on transaction value.

Speaking on proposed amendments in income tax and VAT provisions, Adeeb H. Khan FCA, committee member of the MCCI criticised the proposed new tax rate of 30 per cent for individual taxpayers terming it 'controversial'.

He said the government has few initiatives to expand tax net. Instead it focused on imposing burden on existing honest taxpayers.

 "Every year in April-May period, businessmen face unusual pressure from taxmen to pay additional amount of tax than that of their due ones," he said.

Taxpayers under universal self-assessment are facing audits in broad scale which is against the concept of the system, he said.

 "Especially, large taxpayers are facing audit and harassment. Many of the bank accounts of taxpayers have been frozen by taxmen recently without prior notices. It is unfortunate for existing honest taxpayers," Mr Khan said.

He also expressed concern over proper enforcement of Transfer Pricing Law, to be effective from July 01, 2014, fearing harassment of multinational companies.

Anis A Khan, Vice President of the MCCI, recommended for reconsideration of upfront tax at 5.0 per cent on government securities and cut in corporate tax for banks and financial institutions.  

Salahuddin Kasem Khan, Managing Director of AK Khan Group, said industries in Chittagong are facing frequent power outages to run their operation smoothly.

He urged the government to ensure security to gain confidence of the local and foreign investors.

Habibullah N Karim, MCCI member and IT professional, said tax could be imposed on pre-determined value of per katha land on the basis of area, not flat tax on transfer, to check accumulation of black money.

He also underscored the need for automation of tax administration to ensure efficiency.

Responding to land tax issues, State Minister M A Mannan said the land tax has been proposed by framing the measure hurriedly but it would be reviewed further.

"We have instructed the National Board of Revenue (NBR) to work on the issue," he added.

On security concerns, he said the government is also quite embarrassed on unpleasant incidents in Narayanganj and Feni, but it has to take decision within legal framework.

Mr Mannan said a quarter has created confidence crisis among investors although public investment increased substantially. "We would prefer increasing local investment as there is no skilled labour now to attract high-end foreign investment," he said.

Dr Mirza Azizul Islam said skilled and efficient administration, less corruption, security and political stability are needed for attracting investment. "Total investment has increased but it has been driven by public investment. Private investment has fallen even compared to FY '09," he said.

"Credit growth in private sector has fallen to 11.4 per cent in March 14 compared to 12.7 per cent in March 13. Average interest rate on lending has increased to 13.2 per cent in April 2014 compared to that of 11.2 per cent in August 11," Dr Islam said.

He suggested a continued political stability for the next few years. He pleaded for expediting project implementation process, use of own coal instead of imported ones for coal-based power plants and ensuring security of life and property of people for  attracting investment and attaining higher GDP growth.

"Fiscal incentives will work only when other factors will work properly, he added.

In the welcome note, MCCI president Ms Rahman urged the government to limit the government borrowing from banking sector and mobilise private sector investment through proper implementation of Public-Private Partnership.

Dr Ahsan H Mansur recommended the government to avoid controversial projects and make maximum allocation for good projects.

He questioned allocation of additional Tk 50 billion for capitalising the state-owned banks without any efforts to improve their governance.

On revenue target, Dr Mansur said there would be a large shortfall in domestic tax revenue collection due to slower GDP growth and weak tax administration.

"The FY 15 sets an ambitious revenue target of Tk 1.49 trillion entailing an increase of approximately 25 per cent over the FY 14 possible out-turn," Dr Mansur said.

On Annual Development Programme (ADP), Dr Mansur criticised decline in total allocation to social sectors like health and education.

He, however, appreciated stability in growth performance of Bangladesh while all other countries have suffered much volatility.

Dr Zaidi Sattar welcomed reduction of Supplementary Duty (SD) on imported finished products and suggested reduction of higher protection for local industries.

He, however, questioned the benefits of tariff reduction as consumers are bearing the brunt of tariffs through higher prices.