MCCI slams some budgetary steps, lauds many others

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FE Report
The Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka, said the imposition of tax on income of companies from trading of shares is premature and counter-productive as the capital market is still developing.
"The measures proposed for capital gain tax on transfers made by sponsor-shareholders is also discriminatory and it heavily discourages investment," the chamber said in its budget reaction Friday.
"The imposition of tax on the premium value of shares is in effect a tax on raising capital and not profit, and will therefore be counter-productive," it said.
The country's oldest chamber viewed the Tk 1.32 trillion budget for fiscal year 2010-2011, unveiled Thursday, as challenging and ambitious.
"This budget has been framed against the backdrop of the global economic recession and aims to stimulate local demand, provide protection to selected domestic industries and deliver a wide range of social safety measures aimed at ameliorating the economic condition of the people," it said.
The MCCI said financing and implementing the new budget would pose two major challenges.
It said the significantly increased allocations made for energy, agriculture and rural economy, education, human resource development, IT, health, local government, and social safety nets are commendable.
It, however, said the government's implementation capacity needs to be developed to accelerate the development of our human resources and energy sectors.
"In particular, the coal policy needs to be immediately announced, with open-pit mining process put to use to harness a valuable resource the country already possesses."
The country's oldest chamber said the proposed investments in physical and social infrastructure would help improve the quality of the people's lives and create better employment opportunities.
It said human resource development - being a prerequisite for the country's development - should be a top priority, particularly vocational, technical and skill-related development for effectively and efficiently using the country's workforce in trade and industry.
The allocation of Tk 61.15 billion for energy and power sector is a commendable step by the government, as development of the economy hinges on gas and power, it said.
"The budget has highlighted that even after signing of contracts, production of power is delayed due to a variety of reasons and we feel these bottlenecks need to be eliminated on a priority basis," it said.
The allocation of Tk 40.0 billion for agriculture subsidy and Tk 30.0 billion for public-private partnership (PPP) are also commendable steps, said the MCCI, adding that implementation continues to be limited due to the absence of a clear government policy, which needs to be expedited.
"The budget focuses on high growth rates in GDP, exports, imports, remittances and investment. Special attention, however, needs to be given to specific measures to contain inflation in the light of rising global commodity prices," it said.
The chamber welcomed the announcement of a Tk 20.0 billion stimulus package for the recession-hit export sector.
The chamber said there are several provisions for changes in tax administration, which ought to be reviewed in consultation with the stakeholders so as to eliminate harassment of taxpayers.
The MCCI hailed introduction of online VAT registration procedure and submission of returns.
"However, imposition of VAT on any transaction not involving value addition, such as rentals on business premises, is wrong, onerous and raises the cost of doing business," it said.
The chamber also appreciated simplification of price declaration procedure, VAT Act and Rules. However, the proposed "arbitrary determination of price by the VAT authorities is a violation of the concept of value addition and cannot be uniformly applicable to all industries", it said.
The chamber regretted that the budget has not made any provision for rationalising the tax structure in keeping with the recommendations made by the Tax Reforms Commission.
The MCCI welcomed the measures for reducing the cost of doing business. They, however, should not be discriminatory against local business and sectors, said the chamber welcoming the budget proposal to revise the Companies Act.