New VAT, SD measures looking like silver lining
The revenue authority may get an additional Tk 11,000 crore next fiscal year because of the new value-added tax (VAT) and supplementary duty (SD) measures, according to an estimate by the National Board of Revenue (NBR). We also expect to get nearly Tk 8,000 crore from normal growth of businesses.The disclosure came as the VAT department has been assigned to collect 38 per cent of the NBR’s target of Tk 330,000 crore for the next fiscal year.And the new VAT target is 14 per cent higher than the revised goal of Tk 109,800 crore set by the government for the outgoing fiscal year when overall VAT collection is unlikely to cross Tk 100,000 crore.Depending on price slabs, smokers will have to pay from 57 per cent to 65 per cent of SD for every 10-stick next fiscal year, up from 55 to 65 per cent in the outgoing fiscal year, according to the NBR. The official said the additional Tk 8,000 crore VAT and SD might come owing to the spike in prices of the tobacco products, including cigarettes and biri, a kind of handmade cigarettes used by the low-income groups. Cigarette is the biggest sources of VAT and SD and the revenue authority collected Tk 25,500 crore in fiscal 2018-19, up 16 per cent year-on-year. The collection was 30 per cent of the total VAT generated in fiscal 2018-19, according to NBR data.The increased SD on mobile phone usage from this fiscal year’s 10 per cent to 15 per cent in fiscal 2020-21 is likely to bring in an extra Tk 1,500 crore revenue, according to the estimate. Mobile phones and SIM cards were the third biggest sources of VAT and SD after cigarette and construction firms. It brought Tk 5,000 crore in revenue in fiscal 2018-19, up 4 per cent from the previous year, NBR data showed. As VAT benefit on motorcycles ends from this fiscal year, we are also expecting a good amount from the two-wheeler sales,” said the official, adding that Tk 800 crore would come from the sector. Besides, the increased excise duty on bank accounts with over Tk 10 lakh debit or credit balance is also likely to bring nearly Tk 300 in extra tax. The government has raised the excise duty by up to 60 per cent for fiscal 2020-21 and account-holders with more than Tk 5 crore balance in their accounts at any time of the year will face Tk 40,000. The government logged in Tk 2,339 crore in fiscal 2018-19 through excise duty and the collection from bank balances accounted for most of it, according to the finance ministry and NBR data.
Bangladesh’s stimulus package second highest among peer countries
Bangladesh’s stimulus packages aimed at mitigating the impact of the coronavirus pandemic are one of the highest among a selective group of countries in Asia, according to a government paper. The government has announced 19 stimulus packages amounting to Tk 103,117 crore since it reported the country’s maiden cases of coronavirus infections on March 8.The combined support accounted for 3.7 per cent of the country’s gross domestic product (GDP), according to the mid-term macroeconomic policy statement of the finance ministry. Among the select group of countries, Bangladesh only lags behind Indonesia in terms of stimulus packages compared to GDP. The Southeast Asian country has announced stimulus packages worth 4 per cent of GDP.Vietnam has declared stimulus packages amounting to 3.4 per cent of GDP, Pakistan 3.1 per cent, Malaysia 2.8 per cent, the Maldives 2.8 per cent, China 2.5 per cent, Afghanistan 2 per cent, India 1.1 per cent and Sri Lanka 0.2 per cent.Of the stimulus packages, Tk 5,000 crore went to the export industry, Tk 20,000crore to the micro, small and medium enterprises, Tk 30,000 crore to large industries and services, and Tk 5,000 crore to the agriculture sector.Another Tk 3,000 crore has been set aside for micro and small industries and service and this would be distributed through microfinance institutes (MFIs). Under the package, commercial banks would lend to MFIs at 5 per cent. MFIs normally charge 20 to 25 per cent, so if they have to lend this fund at 9 per cent, they are unlikely to come forward, said the former economist of the International Monetary Fund.
Apparel exporters need more support to stay the course
Apparel exporters and textile millers demanded the government accommodate more measures in the proposed budget to recuperate exports and buck up job creation such that the sector can weather the looming economic storm unleashed by the pandemic. Steps needed to revive exports are absent in the budget, and on top of that, source tax has been jacked up to 0.50 per cent from 0.25 per cent for the sector that fetches more than 84 per cent of the total export earnings.The garment and textile millers want the government to double cash incentive on export receipts from all destinations to 2 per cent at least for the time being, which, they said, would help them meet their match in the global market.Considering the time and the overall business situation, the garment sector deserves a reduction in source tax to 0.25 per cent and an increase in cash incentive to 2 per cent. The government’s stimulus package of Tk 5,000 crore for paying garment workers’ wages was not enough as many factories could not avail themselves of the fund, said Arshad Jamal Dipu, vice-president of the Bangladesh Garment Manufacturers and Exporters Association. The government should have brought down the corporate tax for garment factories, he said, adding that the overwhelming target to borrow from the banking sector might shrink the cash flow into the private sector.
Cement makers lament over unmet demands
Cement manufacturers are frustrated over their demands being left unaddressed in the proposed budget, from which they had hoped to avail some assistance to cope with losses incurred for the pandemic. A 60 per cent cut in import duty on clinker and waiver of interest on existing loans were sought by the Bangladesh Cement Manufacturers’ Association (BCMA). They import clinker at $42 per tonne but when they go to pay duty, customs always takes the cost price to be $50 per tonne — it is so unfair. Subsequently, the association called for the import duty on clinker, the sector’s major raw material, to be brought down to at least Tk 300 a tonne from the existing Tk 500.Kabir spoke of the manufacturers having deposited about Tk 750 crore as adjustable advance income tax in the past seven years.Clinker accounted for $900 million of the $1.35 billion worth raw materials that the manufacturers imported last fiscal year. Due to a lack of mineral resources, local cement manufacturers bring in about 18 million tonnes of clinker every year, according to Haque. The sector did not get any benefit from the budget counting a loss of about Tk 600 crore from March 26 to May 30, said MdShahidullah, first vice-president of the BCMA.Cement manufacturers import clinker, gypsum, fly ash and iron slag from China, Hong Kong, India, Indonesia, Thailand, Japan, Korea, Malaysia, Oman and the UAE. There are about 125 cement manufacturing companies in Bangladesh, out of which 37 are in operation and they have an investment of about Tk 30,000 crore. The total production capacity of the cement mills was 58 million tonnes in 2018.
Plastic goods makers demand VAT exemption on low-cost wares
Plastic makers yesterday voiced their displeasure about the lack of incentives for them in the proposed budget for fiscal 2020-21. The government has not withdrawn the value-added tax on plastic-made dishes, jugs, mugs, bowls, glasses, dishwashers, baskets, buckets, soap trays, garbage baskets, hand fans and spice trays, which were mainly used by financially insolvent people who were now unable to pay higher prices thanks to the present crisis, said the Bangladesh Plastic Goods Manufacturers and Exporters Association (BPGMEA).The BPGMEA demanded the cancellation of the NBR’s general order, which conflicted with the VAT act. The government needs to stop wastage and misappropriation of money to increase funding for achieving key targets of the proposed budget. The association also thanked the finance minister for steps to create new entrepreneurs and jobs, increase investment, expand industrialisation, protect domestic industries and to achieve poverty alleviation and national development targets, the government’s vision 2021 and 2041 and sustainable development goals to address the economic crisis arising from the coronavirus pandemic.
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