Implementation of budget in present context highly challenging: MCCI

Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI), in a response to the proposed national budget for 2024-2025 today (7 June), said implementation of the budget is a highly challenging task given the present context of the economy.

The chamber also observed that there are further prospects to optimise the management of the budget, reform tax policies, automate the tax system, reduce system loss in overall tax collection, enhance tax administration capacity, and deliver adequate services to the public, according to a press release signed by MCCI President Kamran T Rahman.

"There is a growing imposition of tax burden on individuals and businesses who fulfil their tax obligations regularly. MCCI strongly emphasises the need for a proper resolution of the matter," the release continued. 

MCCI recommended significant structural reforms in tax administration to enhance effective revenue collection. In the present framework, a considerable number of qualified entities with high income remain outside the scope of taxation, the chamber noted.

It also suggested ensuring an adequate supply of Electronic Fiscal Devices (EFDs) for VAT to speed up the collection process. It also emphasised the prompt automation of the entire VAT system. 

The chamber also advised the implementation of effective financial management practices to limit expenditure on government projects.

However, the MCCI expressed disappointment over the absence of proposed amendments to the terms of cash transactions related to the corporate tax rate. Given that the informal economy makes up about 80% of Bangladesh, such terms and conditions are not compatible, it said.

On the other hand, the chamber suggested reducing the tax deduction at source (TDS) rate on services that create employment, such as construction and infrastructure. The chamber pointed out that the effective tax rate in Bangladesh is very high and calls for an initiative to reduce it by streamlining permissible business expenses and TDS rates.

The MCCI voiced strong concern about the opportunity to whiten undeclared money by paying only a 15% tax. 

"This arrangement will discourage regular, law-abiding taxpayers. It can be perceived as a penalty for taxpayers who comply with their obligations regularly," the statement said. 

It also stressed the importance of periodic monitoring and evaluation of budget implementation, especially considering the global economic crisis.

The chamber further suggested undertaking an interim evaluation of the budget every three months, with revisions as necessary.

The release further stated that the MCCI has consistently advocated that imposing a minimum tax on company turnover was contrary to the established tax policy. Therefore, it is imperative that this be removed, and that tax should only be imposed on taxable income, not on revenue or other funds, it added.