Post-budget reaction

67.5pc budget for non-dev expenditure frustrating

The International Business Forum of Bangladesh (IBFB), one of the leading organizations of the business leaders and civil society members, organized a press conference on “Reaction of IBFB on National Budget 2016-17” on June 8, 2016 at the VIP Lounge of the National Press Club, Dhaka. Mr. Hafizur Rahman Khan, President of IBFB, presented the IBFB’s reactions at the press conference, where, among others, Mr. Humayun Rashid, IBFB Vice President (Finance), Ms. Lutfunnisa Saudia Khan, IBFB Director; Mr. M. S. Siddiqui, IBFB Director; Mr. Md. Ali Deen, IBFB Director; Mr. Md. Ershad Hussain Rana, IBFB Director; Mr. Syed Mustafizur Rahman, IBFB Director, Dr. Md. Mozibur Rahman, IBFB Director and former Chairman of Bangladesh Tariff Commission; Dr. Md. Abdul Mazid, Chairman of IBFB Finance Committee and former Chairman of NBR; Mr. Md. Fakhruddin, IBFB Director; Mr. A K Chowdhury, Chartered Accountant and IBFB Budget Reaction 2016-17(1)Member of IBFB, Mr. Md. Abdus Salam, IBFB Executive Director and former Secretary to the Govt. etc. were present.

The IBFB President said, the Finance Minister has already proven his capability to overcome any challenge in implanting the bigger budget, which is much appreciable. He mentioned, this is much encouraging that the size of the national budget is gradually increasing, and it clearly indicates economic progress and its strength. Attaining the ability of proposing a big budget of Tk 3.40 lakh crore is also a matter great encouragement. The proposed budget for 2016-17 fiscal year is 12.59 more bigger that of 1014-15 and 17.80 percent more than 2015-16 fiscal, he said adding, the government should continue its endeavour for expanding the size of the budget, which is much needed for raising the country to a middle-income country by appropriately implementing the Vision-2021 of the present government.

Making a comparative analysis of the last few fiscal’s budget, Hafizur Rahman said, in the proposed budget, the non-development expenditure was set at Tk 2,29,900 crore, development budget at Tk 1,10,700 crore. This indicates that 67.50 percent budget would be spent as non-development expenditure – of which more than half would be utilised as salaries for government employees, subsidies and in paying interests against loans.

On the other hand, 32.50 percent budget would be utilised as development expenditure, he said expressing frustration that the lion share of the budget would go for non-development activities, rather making necessary spending in productive fields which basically contribute directly to the country’s GDP growth.

In order to ensure further acceleration of the economy, IBFB believes that total 45 percent of the national budget should be utilised for implementing development programmes. Otherwise, the government’s vision for attaining a middle-income status in the next five years and a developed country by the year 2041 would be delayed.

The proposed budget has emphasized on physical infrastructure development, especially in improving railway and road transportation and power generation, which is 29.7 percent of the development budget, he said adding that this was praiseworthy.

IBFB welcomes the government decision of installing pre-paid metering system for checking irregularities in electricity transmission and distribution and also in reducing system loss.

Hafizur Rahman Khan hailed the finance minister for making a vision of constructing international standard convention centre and a 142-story iconic building at the Purbachal housing project site.

Hailing the government for proposing higher allocation for education, technology and social safety net programmes, he said more funds could have been allocated for overall education sector including technical education.

Expressing frustration for lower allocation in agriculture, he said 6.7 percent of budget was allocated in agriculture in this budget but during 2010 and 2016, the annual allocation for farm sector was 9.4 percent in average. Though the amount of allocation in health sector increased, the amount was 5.13 percent of the total budget and 0.47 percent lower than 5.60 percent share of the revised budget for the outgoing fiscal.

Hailing the finance minister, he said government’s plan to introduce pension scheme at the private sector is one of the significant features of the proposed budget.

Mentioning about poor revenue collection data during last few fiscals, IBFB chief said, the government should reconsider the revenue collection target, which is 35.4 percent higher than the revised target of the outgoing year.

Since there is close link between revenue collection and expenditure, it is much essential to achieve the revenue collection target, he suggested. In this context, effective ADP implementation and boosting investment is much important for the government.

Since investment expenditure is considered as the income of an economy, effective implementation of the ADP can boost both public and private investments and ultimately generate income for the economy thus contributing to raising revenue income.

Higher revenue collection can make ADP implementation effective but the revenue target would not be possible unless overall investment, especially private sector investment and proper ADP implementation is made.

Stressing the need for increasing revenue collection to meet the target, he suggested for widening the network for Vat and income tax. Finance minister in his budget sppech mentioned that only 12 lakh taxpayers submitted income tax returns, but there are more people who are financially capable to pay income tax. For this, special drive should be launched for increasing the number of more TIN holders and the actual taxpayers.

For this, he suggested for raising the manpower of NBr and also for providing trainings to them for enhancing revenue collection capacity. Besides, people should be encouraged to pay tax and submit income tax returns through launching various incentive programmes.’

Mentioning about Tk 97,853 crore budget deficit, of which the government planned to collect Tk 38,938 crore from the country’s banking sector as loans, he said this will affect the private sector investment. Loans from foreign sources is much soft, he mentioned adding the government should be more careful in availing of loans from the banking channel ensuring that the private sector credit is not hampered.

Hafizur Rahman Khan also emphasized on prompt releasing of foreign aid and utilising those properly for speeding up the economic growth.

For the further development of the business and investment in Bangladesh, IBFB chief made some recommendations including continuation of package Vat system and widening the Vat net rather than raising Vat rate.

Otherwise, small and medium enterprises would be put under tremendous pressure which will ultimately affect the consumers, warned IBFB president. He suggested the government for continuing the existing Vat rate for 2016-17 fiscal year. Besides, necessary campaign about the new Vat act should be made to create awareness among the traders and the consumers as well.

He said, raising tax at source to 1.50 percent from 0.60 percent would affect the export-oriented apparel industry, he said adding the garments sector has to survive competing with other countries.

Opposing the decision of doubling the Vat package rate, he suggested the government for setting package Vat at a reasonable level and added Vat net can be widened for raising revenue collection.

The government should focus more on widening the net for direct tax like income tax, not the indirect tax like Vat, he said adding, in order to increase the number of taxpayers and TIN holders, the government can form a high-powered committee comprising representatives from NBR, FBCCI, DCCI, IBFB and other similar organisations.

For import of steel billet, it was proposed to raise supplementary duty to 20 percent, Vat 15 percent and per tonne tariff value was set at $400, which will push the import cost of billet to Tk 12,200, 73 percent more than the present cost of Tk 7,000. This will raise price of rod and affect the real estate industry, he expressed concerned suggesting for reducing tariff value at $300 per tonne.

The budget proposed 30 percent duty and 15 percent Vat on import of technology, which will hamper the government move to ensure cyber security at the moment when the country faced incidents of reserve heist by hackers. Considering this, the government should reconsider this.

For supporting the growth of the local manufacturing industry, the government has proposed extension of Vat exemption facility till June 2017 for some industries, which is appreciable he said, but expressed concerned because the same facility for motorcycle sector was withdrawn.

This would severely affect the local motorcycle industry and make a large number of workforce jobless, he added recommending the government for continuation of the facility for the motorbike industry.

IBFB urges the government for setting a 10 percent GDP growth target on the near future.

Mentioning that the Industrial Policy 2015 was approved at the cabinet recently, IBFB chief also suggested the government for formulating policy for different industries and allowing the private sector, different chambers including IBFB for making necessary cooperation to the government in formulating policies on finance, commerce and industries ministries.


Share: