Reconsider VAT rate

The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) yesterday demanded the government reconsider the uniform 15 percent VAT rate as many small enterprises might be affected by it.

“The business community is most worried about the VAT issue, as the new VAT law will be in force from July 1,” said Shafiul Islam Mohiuddin, president of the country's apex trade body.

In his initial reaction to the proposed national budget for the FY 2017-18, the FBCCI chief said excessive bank borrowing by the government might hinder the normal flow of money to productive sectors.

On Thursday, the finance minister in his budget speech proposed borrowing Tk 28,203 crore from commercial banks to plug budget deficit.

The trade body in a statement also said collection of revenue would be difficult for the government due to falling income from two important sources -- remittances and export earnings.

Moreover, the production of agricultural crops was badly damaged in some districts due to flashfloods, Mohiuddin said.

He suggested the government cut corporate tax paid by companies and withdraw corporate tax on e-commerce businesses.

He also recommended that the government should not hike the excise duty on bank accounts.

According to the proposed budget, bank accounts with a balance between Tk 1 lakh and Tk 10 lakh would be slapped with Tk 800 excise duty a year, up from Tk 500.

Mohiuddin said if the higher excise duty was slapped, it would discourage depositors and money might end up abroad through informal channels.

“The government should form a joint working committee with representatives from the NBR and FBCCI to resolve any disputes related to revenue collection and implementation of tax policies,” he observed.

The FBCCI chief welcomed the government's proposal to increase the allocation for the power, energy and communications sectors and other physical infrastructures.

He lauded the budgetary proposals for higher allocation to poverty alleviation, human resource development, education, health and social safety net programmes.

Abul Kasem Khan, president of Dhaka Chamber of Commerce and Industry (DCCI), said the government should reconsider the corporate tax rate and the tax free income limits for individuals.

“The DCCI is overall happy with the government's move to accelerate investment in the country,” he said in a statement.

The trade body called upon the government to set up 10 special economic zones and ensure all utility services there on a fast-track basis.

He said 5-6 percent of the GDP should be invested in infrastructure development. Investment in infrastructure is a pre-condition to attract Foreign Direct Investment, added the DCCI chief. 

About the government's borrowing from banks, Kasem said as there was no liquidity crisis in the banking sector, it would not have an impact on the credit flow to the private sector. “Rather, we have to reduce non-performing loans.”

Meanwhile, the Foreign Investors' Chamber of Commerce and Industry (FICCI) said implementation of the proposed Tk 400,266 crore national budget, which is 26.17 percent bigger than the revised budget of the outgoing fiscal year, would be highly challenging.

The trade body in a statement said the GDP growth target of 7.4 percent would be achievable provided the GDP-investment ratio was maintained at a desired level.

It lauded the government's decision to increase allocations for health services, transport and communication, primary and mass education and power and energy sectors. The chamber also welcomed the proposal to introduce the online VAT registration system.

However, the FICCI expressed concern about the relatively lower allocations for social security programmes and agriculture sector.

It expressed unhappiness at the continuation of supplementary duty on locally manufactured products.

“The chamber observes that the proposed budget with necessary amendments will accelerate investment, improve the business environment and socio-economic condition of the country,” the FICCI said.

Mahbubul Alam, president of Chittagong Chamber of Commerce and Industry, said although the government was willing to introduce the online VAT registration system, most of the businesses didn't have electronic cash registers. Even the NBR officials “lacked knowledge” on the issue, he added.

He called upon the government to keep the existing excise duty on bank accounts unchanged.

Alam, however, welcomed the government's move to exclude some commodities from the purview of the uniform 15 percent VAT.