Budget pro-growth, but may fuel inflation: FBCCI
Monday, 14 June 2010
FE Report
The country's apex trade body Sunday lauded the budget as "pro-growth and broadly business-friendly" but said the proposed new taxes for the upcoming fiscal year would put extra burden on consumers and spike inflation.
In a budget reaction, the Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) said the budget would generate more revenue than the government has projected for the 2010-2011 fiscal year.
"But it will add additional tax burden on the people as the budget has increased taxes in many areas. This will also spur inflation," said FBCCI president Annisul Huq.
Huq said the proposed expansion of value added tax would hike prices of goods and commodities across a broad spectrum, boosting inflation at a time when it is least wanted.
"The government should continue the existing rate of value added taxes," he said, adding the proposed VAT hike "won't generate more revenue but would only lead to increased harassment for shop owners".
The FBCCI judged the government's budget as "pro-growth and pro-business", but listed qualitative implementation of annual development programme as the "biggest challenge".
"In the outgoing fiscal year the government could spend 70 per cent of its development allocation. But the question remains: how much of it was quality spending?" Huq said.
"The government should look at the timely allocation of the budget and the rate of return," he said, adding attainment of the government's growth target would largely depend on how well the budgetary allocations are to be spent.
The Federation said although the size of the budget - Tk 1.32 trillion - is nearly 20 per cent bigger than the outgoing one, it is "not ambitious".
Huq said the budget has projected a record 6.7 per cent economic growth in the upcoming fiscal year and the government has also attached importance to the areas which would determine the expansion.
He said by and large the budget is "business-friendly", but the trade community has some reservations in a few areas, which need to be properly addressed to create a win-win situation for the government as well as industry.
He said for making Bangladesh a middle-income nation policy support on economic zone and industrial development should be made a top priority in the budget before it is approved.
Huq said small and medium enterprises might face troubles as the new budget discourages commercial import of spare parts of capital machinery.
"As a result, they may have to shoulder extra cost," he said adding that the imports of agriculture machinery might also face same adversity.
The FBCCI chief said several statutory regulatory orders (SROs) issued with the finance bill could stand in the way of the business.
"Their (SROs) number is small in this budget. But these orders could jack up cost of doing business in the country and aggravate people's suffering," Huq said.
The FBCCI said Bangladesh's corporate taxes are the highest in South Asia, which naturally discourages companies to pay taxes.
He said the proposed hike in advance income tax from three per cent to five per cent will affect import of all goods and products. "Eventually, the consumers will have to bear the additional burden."
The 10 per cent tax imposed on institutions that trade stocks might also adversely affect the securities market, the apex trade body said.
The federation also demanded withdrawal of five per cent tax slapped on income of sponsor shareholders or directors of companies engaged in trading in the Dhaka and Chittagong stock exchanges and three per cent tax on the shares of companies sold at a premium value.
It said the proposed tax on premium value of shares violates the country's income tax laws, as "the premium value is a part of capital of a company not revenue".
It said the hike in advance trade VAT on imports and manufacturing stage will affect the prices of products.
"The budget has illogically increased VAT at manufacturing stage to 20 per cent from 10 per cent. The government has so far failed to recoup taxes at 1.5 per cent. So the proposed three per cent tax will not bring any good."
The 15 per cent VAT on rents for commercial use and three per cent tax at manufacturing stage will also adversely affect prices of goods and products.
The proposal to bring production of PVC pipe under the purview of VAT regime by withdrawing turnover tax will harm small enterprises, it said.
The FBCCI also urged the government to bring thousands of government officials under the tax net.
Abul Kashem Ahmed, first vice-president of FBCCI, Abul Kasem Khan, president of Dhaka Chamber of Commerce & Industry (DCCI), Abdul Haque, director of FBCCI, and Ha-meem Group chairman A K Azad were present on the occasion.
The country's apex trade body Sunday lauded the budget as "pro-growth and broadly business-friendly" but said the proposed new taxes for the upcoming fiscal year would put extra burden on consumers and spike inflation.
In a budget reaction, the Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) said the budget would generate more revenue than the government has projected for the 2010-2011 fiscal year.
"But it will add additional tax burden on the people as the budget has increased taxes in many areas. This will also spur inflation," said FBCCI president Annisul Huq.
Huq said the proposed expansion of value added tax would hike prices of goods and commodities across a broad spectrum, boosting inflation at a time when it is least wanted.
"The government should continue the existing rate of value added taxes," he said, adding the proposed VAT hike "won't generate more revenue but would only lead to increased harassment for shop owners".
The FBCCI judged the government's budget as "pro-growth and pro-business", but listed qualitative implementation of annual development programme as the "biggest challenge".
"In the outgoing fiscal year the government could spend 70 per cent of its development allocation. But the question remains: how much of it was quality spending?" Huq said.
"The government should look at the timely allocation of the budget and the rate of return," he said, adding attainment of the government's growth target would largely depend on how well the budgetary allocations are to be spent.
The Federation said although the size of the budget - Tk 1.32 trillion - is nearly 20 per cent bigger than the outgoing one, it is "not ambitious".
Huq said the budget has projected a record 6.7 per cent economic growth in the upcoming fiscal year and the government has also attached importance to the areas which would determine the expansion.
He said by and large the budget is "business-friendly", but the trade community has some reservations in a few areas, which need to be properly addressed to create a win-win situation for the government as well as industry.
He said for making Bangladesh a middle-income nation policy support on economic zone and industrial development should be made a top priority in the budget before it is approved.
Huq said small and medium enterprises might face troubles as the new budget discourages commercial import of spare parts of capital machinery.
"As a result, they may have to shoulder extra cost," he said adding that the imports of agriculture machinery might also face same adversity.
The FBCCI chief said several statutory regulatory orders (SROs) issued with the finance bill could stand in the way of the business.
"Their (SROs) number is small in this budget. But these orders could jack up cost of doing business in the country and aggravate people's suffering," Huq said.
The FBCCI said Bangladesh's corporate taxes are the highest in South Asia, which naturally discourages companies to pay taxes.
He said the proposed hike in advance income tax from three per cent to five per cent will affect import of all goods and products. "Eventually, the consumers will have to bear the additional burden."
The 10 per cent tax imposed on institutions that trade stocks might also adversely affect the securities market, the apex trade body said.
The federation also demanded withdrawal of five per cent tax slapped on income of sponsor shareholders or directors of companies engaged in trading in the Dhaka and Chittagong stock exchanges and three per cent tax on the shares of companies sold at a premium value.
It said the proposed tax on premium value of shares violates the country's income tax laws, as "the premium value is a part of capital of a company not revenue".
It said the hike in advance trade VAT on imports and manufacturing stage will affect the prices of products.
"The budget has illogically increased VAT at manufacturing stage to 20 per cent from 10 per cent. The government has so far failed to recoup taxes at 1.5 per cent. So the proposed three per cent tax will not bring any good."
The 15 per cent VAT on rents for commercial use and three per cent tax at manufacturing stage will also adversely affect prices of goods and products.
The proposal to bring production of PVC pipe under the purview of VAT regime by withdrawing turnover tax will harm small enterprises, it said.
The FBCCI also urged the government to bring thousands of government officials under the tax net.
Abul Kashem Ahmed, first vice-president of FBCCI, Abul Kasem Khan, president of Dhaka Chamber of Commerce & Industry (DCCI), Abdul Haque, director of FBCCI, and Ha-meem Group chairman A K Azad were present on the occasion.