Negative effect of fiscal measures on domestic industries high on agenda

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Doulot Akter Mala
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), the apex trade body, today (Tuesday) is set to take up with Finance Adviser Mirza Azizul Islam the budgetary measures, which, it fears, would seriously hurt the interests of the indigenous industries.
The FBCCI submitted to the government Monday a set of proposals for active consideration.
The apex trade body fears that the local industries might face fund constraint due to upward adjustment of import duty.
In the budget, the government proposed a hike in import duty on capital machinery to 10 per cent from 5.0 per cent. It also imposed 10 per cent import duty on jute and textile capital machinery, which has been enjoying zero-tariff facility.
The trade body requested the government for taking effective measures to help the woven industries compete in the international market.
The withdrawal of zero-tariff facility on textile machinery will hinder growth of the woven textile sector, the FBCCI said.
The government has fixed the duty slabs -- 0.0 per cent, 5.0 per cent and 10 per cent -- on import of raw materials.
On the contrary, it has proposed an increase of duty rate for intermediate products to 15 per cent from 12 per cent.
The proposal on withdrawal of 4.0 per cent Infrastructure Development Surcharge (IDSC) will have a little impact on raw materials as it is applicable for finished products only.
The FBCCI has conducted a study on the tariff structure for raw materials.
The chamber body found that the average tax rate would increase by 4.18 per cent due to upward adjustment of tariff for 291 tariff items.
In the study, the FBCCI also found that the tax rate for 121 raw materials would increase to 22.5 per cent from 5.0 per cent due to the proposed fiscal measure. The average tax on those items is now 7.94 per cent.
The apex body urged the government to scrutinise input-output ratio before readjustment of duty structure.
They, however, requested the government to consider some issues like higher production cost due to power shortage, power tariff hike, increased rate of interest on bank loans, fluctuation of foreign exchange rate, trend of price hike of raw materials and oil, and rise in freight premium in the international market.
The trade body urged the government to maintain status-quo for the sake of local industries.
The FBCCI said the government's proposal on withdrawal of IDSC will reduce the prices of imported finished products, but it might affect the local industries.
The government's proposal to reduce supplementary duty slab from 25 per cent to 20 per cent for 219 harmonisation code system (HS-code) products and from 65 per cent to 60 per cent for 13 HS code products will affect local industries.
The chamber body also proposed an allocation of Tk 3.0 billion for revitalisation of sick industries.
The FBCCI proposed withdrawal of Value Added Tax (VAT) on edible oil and imposition of specific duty on import of powdered milk and baby foods.
The trade body has also suggested a ban on import of sugar, if the government feels it necessary, so that it can apply the option of specific duty on sugar to scuttle misuse of the tariff facility and protect local industries.
They also proposed to keep the previously imposed 15 per cent supplementary duty on glucose and glucose syrup, which has been proposed to be withdrawn in the new budget for saving the local glucose producing industries.
The FBCCI also suggested lowering the import duties from 10 per cent to 5.0 per cent and withdrawal of VAT and Advance Income Tax (AIT) on construction materials, chemicals and raw materials.
They also proposed a provision of duty free import of raw materials for poultry and fish industry, agriculture pump and machinery.
In the recommendation relating to income tax, the trade body urged the government to offer equal facility for the industries inside export processing zone and those outside.
The apex body suggested withdrawal of turnover tax, trade licence issuance and renewal fees and 15 per cent tax for filing appeal in the tribunal and adjustment of tax at source with the total tax payable.
The finance adviser would be meeting the chief adviser to discuss the issues relating to finalisation of the budget proposals for the next fiscal.
The meeting will be held soon as the government has less than two weeks' time before the start of fiscal 2007-08, the finance and planning adviser told reporters after a meeting on the country's food security.
Azizul Islam also said the budget of the new fiscal is likely to be approved June 28 or June 29 through an ordinance in the absence of parliament.
Meanwhile, the finance and planning adviser's meeting with Food Adviser Tapan Chowdhury took stock of the country's latest food situation and decided to procure 0.25 million tonnes of rice and 0.13 million tonnes of wheat.
The meeting was told that the government had a stock of 0.5 million tonnes of food grains against a requirement of 1.0 million tonnes.
According to the meeting decision, the government will procure the food grains from the local market.
The finance and planning adviser said his ministry has already considered the opinions and suggestions made by the general people and chamber bodies and think-tanks on the proposed budget.
The MoF has received a total 925 opinions, including 856 electronic mails (e-mail), during the 10-day long feedback campaign.
This was for the first time in the country's history that the MoF sought opinions and suggestions from members of the public on the proposed budget -- a full-fledged one -- under a caretaker government (CG).
The move has been appreciated by many who consider it a transparency of the present caretaker administration.
The MoF formed two committees, headed by additional secretaries, and six sub-committees to monitor the opinions and suggestions.
The committees, which are assigned to monitor and scrutinise the suggestions and opinions relating to proposed fiscal measures on agriculture, industry, financial and business institutes separately, will examine the feedbacks and will put forward their views.
Apart from the opinions and suggestions from the general and expert groups, the MoF will also review the opinions and suggestions that have been ventilated through the media.