Originally published in The Business Standard on 03 June, 2023
The energy crisis has featured dominantly as businesses scanned the proposed budget to see what they got to move forward and what more they need.
They suggest, at a time of acute shortage, energy now needs more allocation than sectors like road transportation to ensure uninterrupted supply to industries to help them run at full capacity, give more revenue to the exchequer, and attract companies willing to shift from some Asian countries.
The apex trade body, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) was more specific about the most burning issue for the business.
“Considering the current situation of electricity and gas supply, the government may cut some allocation from the transport and communication ministry for power and energy,” said its President Jashim Uddin at a press conference disrupted by frequent outages at the FBCCI conference hall in the city on Saturday.
Energy issues came prominently in separate formal budget reactions of other leading trade bodies on Saturday.
“When the gas-power situation in the country was good, the highest investment took place. Currently, our gas and electricity sector has become heavily dependent on imports. As a result, the energy and power sector should be given the most importance. The allocation should be increased. Only then there will be industrialisation. There will be new employment,” Jashim Uddin said.
As generators even did not work during outages leaving the FBCCI board room without electricity for 20 minutes, the apex trade body chief said, “Darkness is more expensive than the cost of electricity. No matter the price, there is no alternative to the power supply.”
Also, the cost of electricity production should be reduced as much as possible, he suggested.
Jasim Uddin said the state-owned Bapex needs more capacity to increase gas supply. Investment is needed here. Qatar did not want to supply LNG after a long-term contract with them. That means having money is not always a guarantee to get fuel.”
Jasim Uddin also said, “Although there is coal in our country, it is not being extracted. Now many advanced technologies are being used in the world. Coal is being extracted without damaging the houses.”
He also mentioned that many businessmen from Japan and Saudi Arabia want to invest in this country. China also wants to move their business to other countries. Therefore, gas-electricity assurance is needed.
He also congratulated the National Board of Revenue (NBR) for the withdrawal of VAT and advance tax on the import of fuel oil, which is expected to reduce the cost of fuel. This may benefit everyone including the industrial sector. It should be noted that fuel prices should be adjusted at the retail level as soon as possible.
Adding that industrial production should be kept normal to ensure the government revenue collection, he said, “We need some necessary reforms and their implementation for the best uses of financial allocations to ensure energy supply to keep industrial production running.”
The country has coal resources, he said, adding that such resources should be used for the benefit of the nation.
“We should bring the latest technology for underground coal mining instead of open mining,” he said, adding that some environmentalists may move against mining.
“We should explore the deep sea for gas, as we have a large area in the deep sea, while Myanmar has started exploration from the Bay of Bengal.”
“The government should allow duty-free import of solar raw materials to encourage renewable energy,” he added.
The FBCCI president has called the proposed budget “development and public welfare oriented” and has demanded increased allocation in the energy sector considering the importance of the industry.
At the same time, he also mentioned that there are eight challenges in the implementation of the proposed budget – taming inflation, to improve the balance of payments situation, stabilisation of the foreign currency exchange rate, increasing forex reserves, import of crude oil and to control increasing prices of fuel, electricity-gas and essential commodities.
Jashim Uddin said the size of the budget is not unrealistic for the implementation of the government’s promises to meet the needs and aspirations of the people of the country. As the infrastructure of the economy grows, the size of the budget also increases every year.
In response to journalists’ questions about imposing Tk2,000 as a minimum tax on those who have no taxable income, Jashim Uddin said about six crore people are using smartphones and three crore people are paying holding tax.
“Everyone wants development and wants to get more services from the government. How will the government provide services if people don’t pay taxes?” He also advised conducting a “tax census” if necessary to boost tax collection.
The apex trade body chief said the NBR needs to increase capacity and efficiency to realise more revenue.
He said income tax and VAT offices should be established at the upazila level to increase the tax-GDP ratio as now many taxable people live at the upazila level.
“Only 28 lakh taxpayers (out of 32) filed income tax returns in this country. How is it possible?” he questioned.
He suggested the NBR should focus on automation and digitisation to realise more revenue, at the same time, the policy department and implementation department should be separated.
The FBCCI president also said advance income tax and advance tax are increasing the cost of doing business. “This tax is neither refundable nor adjustable. Is it necessary to take the tax that will be refunded? Once tax is collected it is very difficult to get it back,” he pointed out.
In response to another question, Jashim Uddin said to meet the deficit, the government can take foreign loans at low-interest rates instead of borrowing from the banking sector.
At present, Tk82,000 crore is spent to pay the interest on the loan. Borrowing from the banking sector may put pressure on private credit flows. Because banks consider it safer to lend to the government than to lend to the private sector.
Regarding the new income tax law, he said, “We have held 17 meetings to give opinions on the new income tax law. Before implementing the law, it is necessary to discuss it with the traders. Otherwise, complications like VAT law may arise.”
Kamran T Rahman, senior vice president of MCCI, raised some disappointments regarding the tax measures of the proposed budget.
He said, “The chamber is concerned that the increase in supplementary duty rates on imported goods may raise the cost of living.”
“We must not forget that the real impact is not limited to numbers and statistics, but in the lives of our fellow citizens,” he told a post-budget discussion in the city jointly organised by the Metropolitan Chamber of Commerce and Industry (MCCI) and Policy Research Institute (PRI).
The MCCI also expressed its disappointment as there was no proposal to revise the terms of cash transactions in terms of corporate tax rates. “We also think that the high effective tax rates would be lowered by rationalising the rate of tax deduction at source (TDS). In addition, we request for the abolition of the minimum tax on the turnover of the organisations,” he said.
The business body said, “Despite the reduction in the tax rates, both business expenses disallowed by the NBR and proposed TDS remain high, thus affecting minimum income tax and an effective tax rate of 40-45%, as per the financial statement. So all actual expenses properly documented should be allowed in full. These issues should be logically considered or excluded.”
“The increase in tax rates on the transfer of flats and immovable property may adversely affect individuals and companies,” the MCCI said, suggesting re-fixation of prices based on area instead of increasing this tax rate.
The business body felt that the new inflation target (6%) may be hard to reach given the current trend.
The MCCI also raised questions about minimum tax for almost every TIN holder and said, “This could be a cause of concern in the informal sector.”
Anis Ud Dowla, the chairperson of Advanced Chemical Industries, said advance income tax (AIT) should be either refunded or there should be a mechanism of carryover. “And the tax on dividends should be only one time.”
Planning Minister MA Mannan said there is a tremendous potential for the government to earn revenue through VAT. “If you buy something, then you have to pay some VAT. There are many exemptions as well,” he said.
Business leaders stressed that the mistrust prevailing between taxpayers and tax authority people must be removed to build a better tax regime.
Habubullah N Karim said, “If NBR treats taxpayers as customers then there will be a possibility to overcome many problems.”
“But with the colonial-based mentality, it would be quite tough. It can be tough with the colonial-based frame of governance. It is needed to fundamentally change the attitude,” he added.
The International Business Forum of Bangladesh (IBFB) has said the budget proposed for the next fiscal year lacks pathways to overcome the critical challenges confronting the economy. The Smart Bangladesh slogan has been built on successes of the last one-and-half decades and announced in the election year without specific pathways to lower inflation, raise revenues, reduce poverty, cut expenditure and improve governance.
The size of the budget, resource allocations and revenue projections do not match with the tough realities, the trade research body says in its responses to the new budget. Even the budget looks least concerned about the recent downgrading of Bangladesh’s credit rating by Moody’s, it points out.
It suggests that the Dhirashram ICD project be expedited to enhance Dhaka-Chattogram rail freights.
It welcomes the decision to provide all export sectors with equal privileges like those enjoyed by the ready-made garment alone.
Keeping Tk4,000 crore aside for economic risk management, launching of universal pension scheme and expanding the social safety net is among the good moves announced in the budget, IBFB president and Energypac Power Generation Managing Director Humayun Rashid lists at a post-budget press conference in Dhaka on Saturday.
Imposition of Tk2,000 minimum tax on all TIN holders for return submission may fail to deliver the intended benefit due to administrative complications, the trade body warns. Raising the tax on mobile phone and internet usage is not a well-thought measure at a time when the economy and society are relying more on virtual connectivity, it said.
The budget has not spoken much about removing hurdles in doing business and preparing for the post-LDC graduation, it states. It neither has any mention of reforming the banking sector including the formation of a much-discussed bank commission, nor has any initiative to attract Japanese investments being shifted from China and some other countries, the IBFB adds.
It also suggests that budget progress be reviewed on a quarterly basis to keep the targets on track and that a high-powered advisory committee be formed to work closely with parliamentary standing committees to help the government in the proper implementation of development works.
The Bangladesh Chamber of Industries (BCI) has said the proposed budget does not have any guidelines for enhancing the capacity of local industries and ensuring the sustainability of micro, small and cottage industries, whose 45% have already been wiped out due to the impacts of Covid-19 and the war.
Import substitution industries need to survive and flourish to help the country’s overall economy stay afloat, but the budget has not given much attention to helping struggling industries return to normalcy, says BCI President Anwar-ul Alam Chowdhury (Parvez) in a statement.
Instead of prioritising IMF’s condition, the national budget needs to focus more on local industries to spur economic growth and create jobs, he feels.
The chamber wants the provision of Tk2,000 minimum tax to be withdrawn and the tax-free income limit to be raised to Tk5 lakh taking into consideration people’s cost of living and soaring prices.
The chamber says industries are running at half-capacity due to a shortage of energy, hiked prices and erratic supply of gas and electricity. Moreover, import LC opening declined 56% for capital machinery, and 31% for intermediate goods and raw materials during the 10 months of the outgoing fiscal year due to the contractionary policy of Bangladesh Bank, it points out, seeking the central bank’s instruction to banks not to obstruct imports of industrial raw materials.
Moreover, the government needs to ensure an uninterrupted supply of electricity at a low cost to help industries run and keep their cost affordable, the BCI president says.
He suggests the expansion of tax collection drive beyond cities like Dhaka and Chattogram, as districts account for 45% of the country’s economy and can be a good source of revenue for the NBR.