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Bangladesh economy is now in a ‘yellow zone’ due to inflationary pressure, depleting forex reserve which needs at least next two years to become ‘green’.
Continuation of contractionary monetary and fiscal policy is required to improve the status.
It also needs to merge the government’s ministries to cut its number and trim expenditures, efficient management of state-owned enterprises asset value, slashing G2G loan and focus on concessionary loans.
Dr Ashikur Rahman, senior economist of the Policy Research Institute (PRI), made this view at a pre-budget discussion on “Highlighting Income Tax, VAT, Customs duty, Sector-wise allocation of budget, external debt, et,” organised by the Institute of Chartered Accountants of Bangladesh (ICAB) in collaboration with the Economic Reporters Forum (ERF) on its premises on Sunday.
In the discussion, economists and accountants are in differences on opinion over introduction to property taxes in the upcoming fiscal year.
Dr Ashik and PRI Executive Director Dr Ahsan H Mansur recommended reintroduction of property taxes while former tax member Aminur Rahman and Md Humayun Kabir FCA, council member and former president, ICAB, termed it difficult in the existing economic context as the measure was repealed for implementation failure earlier.
Former planning minister Dr Shamsul Alam attended the programme as chief guest.
Mr Humayun Kabir moderated the programme, also attended by ICAB president Mohammed Forkan Uddin, Chief Executive Officer (CEO) of ICAB Shubhasish Barua Bose, former Vat member Farid Uddin, Former Bangladesh Tariff Commission member Dr Mostafa Abid Khan, Adviser to the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Manzur Ahmed, former chairman to the National Board of Revenue Dr Mohammad Abdul Mazid, former senior secretary to the Finance Division Mahbub Ahmed, former President of the Japan Chamber of Commerce and Industry Abdul Haque, Executive President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Mohammad Hatem, former president of the Metropolitan Chamber of Commerce and Industry (MCCI) Saiful Islam, vice-presidents of ICAB Lutful Hadee and Marina Howlader and ERF president Refayet Ullah Mirdha.
Speakers have suggested that the government should frame budgetary measures to combat inflation, increase domestic revenue mobilisation, reform the tax department, separate tax policy and implementation wing, discuss with the stakeholders before devising any measures, reintroduce the original VAT Act-2012, take measures to resolve tax and vat officials harassment by seizing vehicles in road, cut tax break, reduce expenditure on non-productive sector and have political commitments to bring changes, rationalise import taxes to sign Free Trade Agreements etc.
Dr Alam said there is no option without raising tax GDP ration which is 7.8 per cent in Bangladesh while Vietnam has 11.6 per cent, Nepal 17.49 per cent, Sri Lanka 10.6 per cent, Pakistan 10.4 per cent.
The ICAB president gave special emphasis on increasing revenue, avoiding contradictions in laws and prevention of tax evasion, ensuring transparency in the application of laws and giving more encouragement to investment activities.
For avoiding contradictory provisions and loopholes of the existing Act, ICAB proposed to include definition of “industrial undertaking”
“Any change in the financial budget through the Finance Act should always be applied prospectively and rationalization of tax deduction at source mentioned in Sections 89, 90, 120, 117 and 118 of the Income Tax Act, 2023 also proposed by ICAB,” he said.
ICAB’s proposals on VAT are to include “joint venture, consortium and association” in the definition of “entity deducting at source”, clarify the definition of sub-contractor and project and clarify the provisions on levy of interest under section 127 of the VAT and Supplementary Taxes Act, 2012.
“To bring discipline in the country’s commodity market and to stabilise the price, special audit on certain companies engaged in the business of essential commodities should be performed. Chartered Accountants could collaborate and conduct special audits if necessary,” he said.
He said foreign professionals and firms are providing unauthorised services, for which, the country is losing a huge amount of foreign exchange every year and stop this practice to ease pressure on forex reserve.