The Foreign Investors' Chamber of Commerce and Industry (FICCI) has identified stability of socio-political situation as the main challenge to implement the newly-announced national budget for the next fiscal year (FY), 2015-16.
The chamber in a statement on Friday was also sceptical about the government's ambitious 7.0 per cent gross domestic product (GDP) growth target, saying it will require an increase in the GDP-investment ratio from current 28 per cent to 32 per cent next year.
"The proposed budget of Tk 2.95 trillion, which is 17.2 per cent higher than that of the previous fiscal, is somewhat challenging. But the chamber thinks it is achievable, subject to stability of socio-political situation." Appreciating increase in allocations for social security and welfare programmes, including widening of social safety net, and for energy sector in the budget, the FICCI, however, expressed its concern over cut in allocation for health sector.
The foreign chamber criticised imposition of tax on Workers' Profit Participation Fund, 1.0 percentage point higher Value Added Tax (VAT) on procurement providers, and tax on gratuity funds of the private sector employees exceeding Tk 25 million.
FICCI also expressed deep concern over withdrawal of tax rebate in case of listed companies that declare dividend at 20 per cent and above.
"In some cases, the government has made provisions dictating product price, which is illogical in an open market economy and contradictory to the spirit of the VAT laws."
The chamber urged the government to change some provisions of the proposed VAT Act, which, it said should have been enacted from this year.
This would have created the VAT Authority, and allowed the industry to prepare itself with new provisions to acclimatise with changes in the legislation.
FICCI appreciated some proposals in the budget, including reduction of minimum tax rate from 0.30 per cent to 0.10 per cent for manufacturing companies, rate of corporate tax of listed banking and non-banking financial institutions by 2.5 per cent, SIM tax from Tk 300 to Tk 100, and Customs Duty on imported machineries from 2.0 per cent to 1.0 per cent.
The chamber, however, expressed its dissatisfaction for not considering some of its proposals, including cutting corporate tax on non-listed companies and tax on distributors.
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