Over-estimated revenue target affects budget feasibility: World Bank
The World Bank (WB) Wednesday found the government’s revenue projections in the national budgets beyound its mobilization capacity. This, it said, creates fiscal imbalance, leading to problems in their implementation. The National Board of Revenue (NBR) lacks the capacity of mobilizing the higher estimated revenue targets which are making the budget execution sometimes challenging, said lead economist of the WB Dr Zahid Hussain. He was talking to journalists while presenting the WB’s review of Bangladesh’s BDT 3.4 trillion national budget for the upcoming financial year (FY) 2016-17 at the WB Dhaka office Wednesday. “There should be a similar co-relation between the nominal gross domestic product (GDP) and revenue income. Usually if revenue income decreases, the nominal GDP growth also drops. On the other hand, if the nominal GDP increases, revenue earnings rise. But in Bangladesh it is not happening,” said Dr Zahid Hussain. He further said it is proved that the NBR lacks capacity in assessment of the revenue income target. According to him, the NBR had estimated to achieve 85% of its original revenue target in the outgoing FY2016, while 82.8% in the FY2015 and 81.9% in FY2014. Similarly, the non-NBR tax income had also fallen short of target from the original projection in the national budget in the previous fiscals. However, neighboring India has performed better in tax collection as it has achieved 97% of its original target.
Another gas price hike on the cards!
After enforcing a substantial hike in September last year, the energy regulator is again mulling further raise in prices of gas at retail level. It is targeting to raise it to BDT 1200 for double burners and BDT 1000 for single burners at consumer level. The compressed natural gas (CNG) price is scheduled to rise to BDT 58 from existing BDT 38. The Bangladesh Energy Regulatory Commission (BERC), according to a report in a contemporary daily this week, has moved to enforce the newly fixed rate hastily after conducting a public hearing this month. All categories of consumers are expected to come under the enhanced tariff structure. On its part, the BERC maintained that it had closely examined the logic behind the hike in gas and power tariffs. The proposed rise is still being kept at the minimum level, it claimed. Gas price is too low in Bangladesh as compared to many countries. The regulator claimed the gas price in the country is one-third of what it should be. Since September last year, retail customers are spending 2.9% on an average more on electricity. Households using a single burner were paying 50% more with the monthly gas price going up to BDT 600 from BDT 400. For double burner users, the tariff was raised to BDT 650 from BDT 450 a month. Industries that turn gas into electricity through generators saw gas tariff to double — BDT 8.4 from BDT 4.2 per cubic metre. That was the first hike in gas tariff since 2009 though CNG prices went up twice in 2011. On the other hand, the retail power price was raised on six occasions in the last six years — the last one in March 2014.
Government to cut proposed tax at source on export
The government is likely to reduce tax at source on export of all products in the budget for the next financial year 2016-2017 from the proposed 1.5%, officials of the finance ministry said. They said that the ministry was actively considering reducing the tax following tremendous pressure from different stakeholders, mainly exporters from readymade garment sector, like previous years. The government, however, has yet to make any decision to what extent it will reduce the tax rate but it will not be below 1%, they said. Finance minister AMA Muhith in his budget proposal tabled in the parliament on June 2 proposed to increase the tax at source on export of all products to 1.5% for the next fiscal year from the current rate of 0.6%. The National Board of Revenue in July 2015 reduced the export tax to 0.6% for one year through a statutory regulatory order from the 0.80% set in the income tax law. The benefit is scheduled to expire on June 30 and 0.8% tax rate will automatically be come into force even if the government does not bring any change to the law. Income tax officials of the NBR are now working on the issue including estimating the revenue collection from different rates and probable revenue loss due to reduction in export tax rate, a high official told New Age on Monday. The tax authorities projected to get BDT 40.0 billion from the sector by imposing 1.5% tax on export proceeds, he said adding that major reduction in the rate would affect revenue collection. The NBR will prepare a summery for the finance minister in this connection analyzing revenue impact and other aspects of reduction of the rate from the proposed rate though it was not in favor of any significant reduction of the tax. The final decision will be made following instruction from the government high-ups as the issue has political sensitivity, the official said. Trade bodies including the Federation of Bangladesh Chambers of Commerce and Industry, Bangladesh Garment Manufacturers and Exporters Association, Bangladesh Knitwear Manufacturers and Exporters Association, Exporters Association of Bangladesh, Bangladesh Textile Mills Association, and Bangladesh Shrimp Exporters Association are strongly demanding the tax reduction. The BGMEA and BKMEA demanded that the rate be reduced to 0.60%.
FDI in BD up by 44.0%: UNCTAD report
Unlike domestic private investment, foreign direct investment (FDI) flows into Bangladesh increased significantly in 2015 to USD 2.2 billion by a UN agency count. According to the UNCTAD World Investment Report 2016, the amount was the highest FDI the country ever received in its history. The increase is about 44.09% as compared to USD1.6 billion recorded in 2014. Manufacturing sector attracted the highest amount of FDI amounting to USD 841.23 million which is followed by power, gas and petroleum USD 573.6 million, trade and commerce USD419.2 million and transport, storage and communications USD258.4 million. Among South Asian countries, Bangladesh stood second after India which received USD44 billion. India’s position as the tenth-largest FDI recipient in 2014 remained unchanged in 2015, though the FDI amount increased from USD35 billion to USD44 billion in 2015.
FBCCI seeks revision of budget proposal on income tax, VAT
The apex trade body has once again demanded revision of the finance minister’s budget proposal on income tax, customs duty and value-added tax for the next fiscal year. Subsequently, the Federation of Bangladesh Chambers of Commerce and Industry has submitted a set of recommendations to the National Board of Revenue that it believes are necessary to accelerate economic development through industrialisation and investment. The FBCCI, as part of the major recommendations, called for reinstating the 0.6% tax at source on export, reducing the corporate tax to 10% from the proposed 20% for garment sector and increasing the tax-free limit to BDT 300,000 on individual income. It also urged the government to increase the limit of turnover tax from BDT 8.0 million to BDT 5.0 million and re-fix the turnover tax at 0.5% instead of 3%. The FBCCI asked for the full implementation of the VAT law for small and medium enterprises based on their business performance. It also demanded withdrawal of advance income tax on import of capital machinery, basic raw materials, intermediary goods and other ingredients used for industrial purposes, and continuation of VAT-free facility for loaves, buns, slippers, cakes and biscuits. Also, a leading chamber yesterday suggested the government should widen the tax net rather than putting the burden of extra tax on the existing taxpayers for fulfilling the collection target.
Telcos getting back customers
The mobile phone industry is seeing a rise in its customer base after it got hit in the first three months of the year. The total number of active SIMs by the end of May stood at 132.6 million, according to the telecom regulator’s monthly report. The industry added 1.2 million new mobile internet connections in May, just prior to the end of the SIM re-registration process, according to a report of Bangladesh Telecommunication Regulatory Commission. The operators added seven lakh new connections in May as well, said the report. As of May, the total number of internet connections stands at 63.3 million, 59.8 million of which are from the mobile segment. The Wi-Max industry has consistently been losing customers for the last couple of months, and its total number of connections stood at 118,000 at the end of May. However, the number of fixed internet connections increased 151,000 in May to reach a total of 3.4 million. Till May 31, all six mobile operators verified or re-registered 117.0 million SIMs, and blocked all unverified SIMs from the first day of June. Complying with a government order, the operators began re-registration with biometric verification from January and they lost connections in the first three months.
Ecnec approves Teletalk’s 3G expansion project
Executive Committee of the National Economic Council yesterday approved the Teletalk’s 3G network expansion project of BDT 6.8 billion. Of the total amount, the government will finance BDT 6.1 billion while rest of the amount will be provided by Teletalk, the state-owned mobile phone operator. The money will be spent to expand the operator’s 3G network to the country’s rural areas. “This is the second project related to Teletalk internet network expansion after first project failed to take the operator’s 3G internet facility to rural people,” said Planning Minister AHM Mustafa Kamal. The project work will get under way next month and is scheduled to be completed by December, 2017. Under the project, Teletalk will set up cyber centres and 1,200 base transceiver stations (BTS). Besides, a total of over 500 BTS of 2.5G will be built. Earlier, the government had tried to manage foreign loan to expand its 3G network. But their steps failed to manage foreign loan though initiatives were taken several times.
World Stock and Commodities
|Index Name||Close Value||Value Change||Percentage Change|
|Crude Oil (WTI)*||$49.45||+0.32||+0.65%|
|Crude Oil (Brent)*||$50.16||+0.28||+0.56%|
|Dow Jones Industrial Average||17,780.83||(48.9)||(0.27%)|
|USD 1||BDT 78.35*|
|GBP 1||BDT 115.93*|
|EUR 1||BDT 88.88*|
|INR 1||BDT 1.16*|
*Currencies and Commodities are taken from Bloomberg.