In response to Finance Minister Abul Hassan Mahmood Ali’s presentation of the budget for FY2024-25, the Metropolitan Chamber of Commerce and Industry, Dhaka on Friday highlighted various challenges and recommendations for effective budget implementation.
MCCI in a statement said that in the current economic situation, the government has set a formidable task with an 11.63 per cent increase in the revenue collection goal, targeting Tk 480,000 crore for the fiscal year 2024-2025 compared to Tk 430,000 crore in the previous fiscal year.
This escalation could pose a significant challenge in achieving effective budget implementation.
The chamber underscored the importance of prudent financial management practices to restrain government project expenditures.
It emphasized the need to justify project expenses to alleviate the tax burden on citizens.
Additionally, MCCI suggests precautionary measures in foreign exchange expenditure to maintain macroeconomic stability and recommends regulating subsidies on electricity, gas, and fertilizer prices.
MCCI expressed concern over the substantial number of high-income entities remaining untaxed, leading to an increasing tax burden on compliant taxpayers.
Addressing this issue was deemed crucial. Moreover, the chamber highlighted the impact of rising inflation on future business expansion and advocate for a budget focused on pro-poor and inclusive growth.
MCCI strongly opposed the opportunity to whiten undeclared money by paying only 15 percent tax, viewing it as a penalty for compliant taxpayers.
The chamber advocate for introducing penalty provisions along with maximum tax rates to encourage regular taxpayers.
Despite the proposed allocation of Tk 136,026 crore for the social safety net, a 7.72 per cent increase from the previous year, MCCI called for a judicious increase in this allocation.
It also deemed the current inflation target of 6.5 percent unrealistic, given the recent inflation rates exceeding 9 percent for 14 consecutive months.
The National Board of Revenue (NBR) has set an increased revenue collection goal of Tk 4,80,000 crore, 11.63 percent higher than the previous target for the fiscal year 2023-24.
MCCI recommended tax policy reforms, tax system automation, reducing system loss in tax collection, and enhancing tax administration capacity to improve revenue collection effectiveness.
The estimated budget deficit for FY2024-2025 is Tk 2,56,000 crore, representing 4.6 percent of GDP. MCCI thought that this deficit might widen due to ongoing tax reform conditions imposed by the International Monetary Fund (IMF), potentially increasing the tax burden on taxpayers.
The chamber said that the government’s borrowing target from the banking system was Tk 137,500 crore, up by 11.82 percent from the revised budget of Tk 155,935 crore for FY 2023-2024.
This increase posed two potential challenges: firstly, heightened credit supply from banks may crowd out private sector investors, leading to a shortage of funds for them. Secondly, government borrowing from the central bank could elevate inflationary pressures, burdening consumers or the public.
MCCI emphasized the need for seamless coordination in government borrowing from the banking system to avoid crowding out private sector investment and inflationary pressures.