No need for high ambitious budget
FBCCI President Jasim Uddin
Industry Report: The ongoing Russia-Ukraine war has changed the face of the world economy. In this situation, the budget should be formulated realistically, taking into account the global context and internal capacity.
Better not to have an ambitious budget. Jasim Uddin, president of FBCCI, the apex body of businessmen, believes that it is necessary to withdraw taxes on daily commodities and agricultural products and to pay special attention to the agricultural sector to keep the prices normal.
Question: How should the next budget be in global and domestic context?
Jasim Uddin: Due to the prudent and far-sighted decision of the honorable Prime Minister, Bangladesh has handled the corona epidemic situation well. But due to the Russia-Ukraine war, there is currently a global recession. On the one hand, the price of energy and industrial raw materials has increased; On the other hand, in Europe and America the export income has started to decrease due to the decrease in the purchasing power of the people. A negative trend is also being observed in revenue income. Moreover,
imports have been controlled due to the dollar crisis. This has reduced the import of industrial raw materials and capital equipment, which is worrying for the economy. In this reality, there does not seem to be any justification for making an ambitious budget in the current situation. It is not advisable to budget for growth all the time.
Question: Why is the revenue income not increasing?
Jasim Uddin: Our tax-GDP ratio is lower than neighboring countries. Because the area of revenue collection is very small. Only two companies are providing 20 percent of total VAT. The remaining 80% VAT is paid by several lakh companies. Same is the case with income tax. More than 50 percent of the total income tax comes from tax at source. In this case, NBR does not have to suffer much, it is sitting and receiving income tax. Even though there are endless opportunities to collect revenue across the country, NBR is not able to take it.
Only those who are paying tax are being burdened with tax. There is no substitute for automation to increase revenue collection. We have been saying this for 10 years. But no one took notice. Now the IMF is reeling from the conditionality. Automation should be done like automation. Automation was talked about during the new VAT law but nothing happened at all. The result of investment of hundreds of crores of rupees is zero. Everything is going on as before.
Question: What steps can be taken in this case?
Jasim Uddin: There are more than 3 crore holding numbers in the divisional cities including Dhaka, Chittagong, more or less all of them pay holding tax. However, less than 30 lakhs are submitted in income tax returns. There is an opportunity to increase the income tax by holding the holding numbers. NBR can’t go there. To do this, bold decisions like restructuring and capacity building of the NBR will have to be taken.
Rural economy has developed a lot. There are also people to pay tax-VAT. That is not being done. There is a tendency to increase collection only by increasing the tax rate. Policy wing of NBR needs to be separated for harassment free enforcement.
Question: Will reliance on bank loans to meet the deficit hinder private sector investment?
Jasim Uddin: Bangladesh’s debt is not high. For this reason, the domestic (banks and financial institutions) and foreigners (donors and foreign banks) want to give loans to the government, thinking it is safe. This debt should not be a problem if revenue collection is correct. He also said that Bangladesh Bank is talking about lifting the loan interest limit after July on the terms of IMF to reduce inflation.
Doing so will further increase inflation. Because the economy of Bangladesh and the economy of America are not the same. The economy of that country is formal and ours is informal. 80 percent people are not in the banking system. Raising our interest rates means raising the cost of production of goods, raising prices. All those who are asking to leave interest to the market system have some agenda.
Question: Fuel scarcity and rising prices are hindering industrialization. What do you think?
Jasim Uddin: When the price of fuel increases in the international market, the price is increased in the country. But less is not reduced. Industrialization in Bangladesh has been based only on gas. Industries developed in areas where gas was available. Traders have accepted the decision to increase gas prices on the condition of uninterrupted supply. Currently out of stock. But money has to be paid. The reason is said to be the dollar crisis. It is not right to increase the price without ensuring uninterrupted supply.
Question: What steps should be taken in the budget to prevent the increase in commodity prices?
Jasim Uddin: All types of VAT-tax including advance income tax should be withdrawn on daily necessities and agricultural products which have no substitute for import like edible oil, sugar. There should be a plan to collect the amount of revenue from the import of these products from other sectors. Besides, food security should be given special attention in agriculture.
The rice produced in the same amount of land in China, Vietnam is much less than that in Bangladesh. Therefore, research should be emphasized to bring improved breeds. Once upon a time, people did not eat soybean oil, nor did they know it. While increasing the production of paddy, the production of mustard has decreased. If paddy land can be saved through improved breed, oilseed cultivation can be done there. Then import dependence will decrease. Until then, all kinds of tax breaks should be given at the supply level to keep the price of goods bearable.
Question: Will IMF conditions affect trade?
Jasim Uddin: Bangladesh will not run on IMF’s prescription
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