Nation awaits Tk 7.97 tr budget

Big changes to be increased VAT-tax

Enayet Karim: Order has not yet returned to the commodity market. The price of fish, meat, spices or rice and pulses is not affordable. Bangladesh Bureau of Statistics (BBS)’s latest updated estimates say that food price inflation in May was 10.76 percent, which was 10.22 percent in the previous month. In other words, the same product which cost Tk 100 to buy in May last year, it costs Tk 110.76 to buy the same product in May this year. In this situation, the national budget for the next financial year (2024-25) is being announced today.
Senior diplomat, politician and finance minister Abul Hassan Mahmud Ali will present the budget in the National Parliament. This will be his first budget announcement.
The size of the budget for the financial year 2024-25 is going to be Tk 7 lakh 97 thousand crores (Tk 7.97 trillion). That is, the government wants to increase the expenditure in the new financial year by about Tk 36 thousand crores compared to the previous year (2023-24). The size of the budget for the financial year 2023-24 was Tk 7 lakh 61 thousand crores.
Abul Hassan Mahmud Ali told Daily Industry about the new budget that the main goal of the next budget will be to keep the prices of daily commodities affordable.
The government will be under pressure this time with the resources of income to handle the expenses. Big budget, so the revenue collection target is around Tk 5.5 lakh crores. Out of this, the government will aim to collect taxes of Tk 4 lakh 80 thousand crore through the National Board of Revenue (NBR). The rest will be met from non-board revenue sector.
As per the target, the new budget will have a large deficit even if the revenue is collected. In terms of taka which is about Tk 2 lakh 56 thousand crores. To meet the deficit, the government wants to take loans from domestic banks and foreign sectors. Of this, he wants to take Tk 1 lakh 37 thousand 500 crores from the bank. Tk 15,400 crores want to take loan from savings certificate. And the target of foreign debt has been fixed at Tk 1 lakh 27 thousand 200 crores.
The government has to borrow more than ever to fund the budget. As a result, the debt repayment pressure is increasing. In addition, the dollar-crisis and the high value of the dollar have put more pressure on the government to repay the debt. For the next financial year, the interest payment target has been fixed at Tk 1 lakh 13 thousand 500 crores.
Finance Minister’s budget speech is titled ‘Commitment to build a happy, prosperous, developed and smart Bangladesh’. In other words, the finance minister is dreaming of building a smart Bangladesh despite various economic crises. And for that he wants to spend Tk 2 lakh 65 thousand crores on the construction of the country’s infrastructure.
The government will reduce the target of growth of gross domestic product or GDP in the next budget. The GDP growth target can be reduced from 7.5 percent in the current financial year to 6.75 percent.
Finance Ministry and NBR officials said that many changes are being made in the field of VAT and taxes to increase revenue in this year’s budget to deal with the economic crisis. Tax exemptions will be lifted in some sectors to meet higher revenue targets to meet IMF loan conditions. Besides, in some cases the tax exemption is not there and, in some cases, it is being reduced. There will be several steps to add new taxpayers or increase the tax net. In addition to increasing the VAT rate, the scope will be increased.
Economists say that these measures could put a large section of people under pressure from high inflation again. Common people want the new budget to make their lives easier. Prices of consumer goods and daily necessities so that they are within their reach. Market analysts say that it is important to have big plans in the next budget to control commodity prices.
In this context, the executive director of the private research institute Policy Research Institute Ahsan H Mansoor told, “It is important to have effective measures to control commodity prices. Some more effective steps should be taken like making the dollar exchange rate market-based.
He said, “Even if the price of the dollar increases now, it will have a positive effect on controlling inflation in the long term.” In the current financial year, the revenue collection may be Tk 3 lakh 80 thousand crores, which is about Tk 50 thousand crores less than this year’s target. I do not know how it is possible to collect the revenue of Tk 4 lakh 80 thousand crore in the next financial year.
On the one hand, the tax-free income limit is not increasing in the new budget, despite the rise in inflation due to the urge to increase revenue. On the other hand, there are measures to collect additional tax from the rich. Currently, if the annual income is more than Tk 16.5 lakhs, the tax rate is 25 percent. In the next budget, the tax rate is kept at 25 percent for income up to Tk 38.5 lakh. But in case of higher income, it is being increased to 30 percent.
Apart from this, there may be a decision to impose ‘Capital Gain’ tax on profits of more than Tk 40 lakh by investing in the capital market. This rate can be 15 percent. Some other services including community center rent may require return deposit certificate to increase the tax coverage.
Sources say the National Board of Revenue (NBR) is bringing more than a dozen income tax-related changes in the budget for the next fiscal year. Among these, there will be various proposals to increase the income including increasing the maximum rate of income tax for the individual class, imposition of gain tax on the capital market. There will be an opportunity to whiten black money. Tax benefits in the physical infrastructure sector will be cancelled. Tax rates will be reduced in a few cases.
NBR will propose to increase the maximum rate of personal tax by 5 percent to 30 percent to raise revenue. A slab of Tk 20 lakh will be added. Besides, the amount of money in the middle two slabs will increase by 1 lakh. Companies that are not listed on the stock market can reduce their corporate tax by 2.5 percent.
However, the tax conditions of listed companies will be reversed. Tax rates may increase by 2.5 percent to encourage cashless transactions. The turnover tax of companies manufacturing juice products may increase by 3 percent. Corporate tax on cooperative societies will increase by 5 percent.
Exemption from tax on stock market trading profits is being cancelled. If the profit is more than Tk 50 lakh in a year, the gain tax will be at the applicable rate, i.e. combined with the other income of the individual. Besides, the gain tax of entrepreneurial director of the company will increase to 15 percent.
Exemption benefits may not increase in 14 sectors including hi-tech parks, deep sea ports. The benefits of 10-year corporate tax exemption in these sectors are ending this month. IT sector tax exemption benefits may be extended by 3 years. Tax at source may increase by 10 percent on profits deposited in banks of government universities and MPO institutions. However, the tax at source on supply of food products through letter of credit and as a contractor will be halved. Source tax on supply of raw materials will be reduced to provide relief to the manufacturing sector. The maximum rate can be reduced to 5. Proof of return deposit may be mandatory in 3 cases including community center rent for marriage.
It is known that NBR has adopted the strategy of at least additional Tk 15 thousand crores of revenue by reducing tax exemptions and duty-tax exemptions in this year’s budget.
Tax exemptions may also be reduced in readymade garments, microcredit, remittances, poultry and fisheries. In the new budget, the government plans to increase the VAT rate from 5 percent to 15 percent on the production of mango bars and juice, tamarind juice, guava juice, pineapple juice, etc. In big cities including the capital Dhaka, security services have become almost essential in various sectors including homes, offices, business establishments. Now 10 percent Value Added Tax VAT has to be paid for taking such security services. NBR is planning to increase it to 15 percent in the next budget.
In order to increase non-tax revenue, the rental price of district, upazila, and even union level hatabazar will increase slightly in the next budget. Along with that, the land registration fee will also increase. The government is thinking of increasing the amount of fines and penalties imposed by the government, including mobile courts. Apart from this, the tolls, service and administrative charges for crossing various bridges including flyovers, expressways may be increased.
Over 50 products with zero duty may be levied import duty at the rate of 1 percent from the next financial year. At present there are 329 products that have no duty on import. This list includes food products, fertilizers, gas, raw materials for pharmaceutical industry, agricultural materials etc. The products that are being considered for 1 percent import duty include – wheat, maize, mustard seeds, cotton seeds, various vegetable seeds, coal, gypsum, vitamins, penicillin, insulin, various chemicals, plastic coils, paper board, steel National products, industrial raw materials, machinery parts etc. As a result of the imposition of tariffs, people may have to spend more on these products than they currently do.
According to NBR data, the government has been exempting the country’s electronics sector from VAT for several years. There is VAT exemption on AC production till June 30. 5 percent VAT may be levied in the new financial year without extending its period. The rate of VAT on the manufacture of refrigerators may be increased from the existing 5 percent to 10 percent. VAT may also increase on products like LED bulbs, tube lights, liquefied petroleum (LP) gas cylinders.
Cost of importing hospital equipment will increase
Importation of medical devices and equipment is allowed at 1 percent duty on referral or specialized hospital duty free facility subject to compliance of certain conditions. In the next budget, the import of more than 200 medical devices and equipment may be increased to 10 percent, which may further increase the medical expenses of critically ill patients.
An additional 5 per cent supplementary duty may be announced for talking on mobile phones or using the internet. The tax on the sale of SIM cards by mobile operators may be increased from Tk 200 to Tk 300. At present, 7.5 percent VAT is charged on entry and rides in amusement parks and theme parks. There are plans to increase it to 15 percent.
VAT on soft drinks, carbonated beverages, energy drinks, amsattya may be increased from 5 percent to 10 percent. Apart from this, the minimum tax on carbonated beverages has been increased by 2 percent to 5can be a percentage. Supplementary duty on cigarettes may rise.