Imperatives for budgetary stimuli
Thursday, 13 March 2008
The proposals made by the Metropolitan Chamber of Commerce and Industry (MCCI), one of the leading representative associations of businesses in the country in respect of the coming national budget for the next fiscal year, merits a careful attention. The government should consider the same with an open mind. For some years, the trend has been that the government welcomes suggestions from different quarters while preparing the national budget and also sits with them to discuss these issues. In this context, the MCCI's proposals as far as those relate to curbing discretionary powers of taxmen and ensuring a predictable fiscal framework over the medium term, need to be viewed essentially as part of the dialogue or exchange of views between businesses and government. Before such an important policy document as the national budget is finally prepared or firmed up, the well-considered views of the members of the business community, particularly those involved in production-oriented enterprises, should be taken into dispassionate consideration.
The successful outcome of a national budget depends on the cooperation and easy acceptance of budgetary provision by various stakeholders. Among them, businesses are very important because they are the ones who generate the most revenues for the government's expenditures and also the activities of businesses create economic growth. This, in turn, produces income, alleviates poverty and lifts up living standards - all cherished economic goals. But the point to note is that businesses should find in the national budget enough stimuli to engage in more investment operations so that attainment of these goals can become possible. There is no denying that not all suggestions from businesses need to be positively responded to, by the government for the same may involve narrow sectoral demands having no relevance to broader economic goals. But it must also be admitted that the ones that have true merit in them or would be justifiable in the context of the overall economy by giving a spur to it to produce wide-ranging fruitful results, the same would surely be deserving serious examination by the budget-making authorities for their consideration.
There are proposals in the MCCI package that can be evaluated as demanding cushions for the productive sectors. The on-going economic predicament of Bangladesh is also largely production-related. Productivity in different sectors needs to be boosted to overcome the growing problem of under-productivity and the related problems. Thus, the proposal from the chamber body to reduce the customs duty on capital machinery and intermediate products is realistic and the same can also be said about the suggestion that supplementary duties on raw materials and components may be withdrawn altogether. Reduction in the rate of corporate tax was also proposed by the MCCI and it may be considered as part of the total package of incentives the entrepreneurs are seeking. So, this may also be favourably considered.
Meanwhile, the MCCI has drawn attention to certain incongruities in the tax laws that need to be also addressed. For example, one section of the Finance Act 2005 says that a tax return will not be considered correct even if certified by a chartered accountant, in case where the return shows loss or lesser income than the last assessed income. But such a law is not fair because business incomes do fluctuate year on year because of so many factors.
Meanwhile, the policy planners do need to appreciate in all earnestness that demands for tax reductions or concessions apparently smack of revenue losses, leading to budgetary deficits. But this is only a short view. The longer view is that tax reductions and concessions can inspire entrepreneurs to extend their activities or expand business operations. This happening can increase the base of taxation as a whole helping the collection of greater revenues over the medium and long terms. Revenue collection also improves through better compliance of the taxpayers at reasonable rates of taxes.
The successful outcome of a national budget depends on the cooperation and easy acceptance of budgetary provision by various stakeholders. Among them, businesses are very important because they are the ones who generate the most revenues for the government's expenditures and also the activities of businesses create economic growth. This, in turn, produces income, alleviates poverty and lifts up living standards - all cherished economic goals. But the point to note is that businesses should find in the national budget enough stimuli to engage in more investment operations so that attainment of these goals can become possible. There is no denying that not all suggestions from businesses need to be positively responded to, by the government for the same may involve narrow sectoral demands having no relevance to broader economic goals. But it must also be admitted that the ones that have true merit in them or would be justifiable in the context of the overall economy by giving a spur to it to produce wide-ranging fruitful results, the same would surely be deserving serious examination by the budget-making authorities for their consideration.
There are proposals in the MCCI package that can be evaluated as demanding cushions for the productive sectors. The on-going economic predicament of Bangladesh is also largely production-related. Productivity in different sectors needs to be boosted to overcome the growing problem of under-productivity and the related problems. Thus, the proposal from the chamber body to reduce the customs duty on capital machinery and intermediate products is realistic and the same can also be said about the suggestion that supplementary duties on raw materials and components may be withdrawn altogether. Reduction in the rate of corporate tax was also proposed by the MCCI and it may be considered as part of the total package of incentives the entrepreneurs are seeking. So, this may also be favourably considered.
Meanwhile, the MCCI has drawn attention to certain incongruities in the tax laws that need to be also addressed. For example, one section of the Finance Act 2005 says that a tax return will not be considered correct even if certified by a chartered accountant, in case where the return shows loss or lesser income than the last assessed income. But such a law is not fair because business incomes do fluctuate year on year because of so many factors.
Meanwhile, the policy planners do need to appreciate in all earnestness that demands for tax reductions or concessions apparently smack of revenue losses, leading to budgetary deficits. But this is only a short view. The longer view is that tax reductions and concessions can inspire entrepreneurs to extend their activities or expand business operations. This happening can increase the base of taxation as a whole helping the collection of greater revenues over the medium and long terms. Revenue collection also improves through better compliance of the taxpayers at reasonable rates of taxes.