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FBCCI sees looming tax burden

Star Business Report
A proposed hike in VAT and other taxes will increase the prices of essentials and burden consumers, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) said yesterday.
Revenue collections may surpass targets thanks to additional taxes and VAT, if the proposed budget is implemented, said FBCCI President Annisul Huq at a post-budget press conference at Dhaka Sheraton Hotel.
"But consumers will have to bear the burden. Such taxes may influence the prices of basic commodities."
"Sol urge the government to review the proposal and continue the tax exemption facilities for different sectors."
Pressure will mount on consumers if the VAT is increased to Tk 6,000 a year from Tk 4,200 now at retail and small shop-owners' levels in Dhaka and Chittagong City Corporation areas.
The budget also proposed to increase VAT to Tk 4,800 from Tk 3,600 a year in other city corporation areas.
"This will increase public harassment, " the apex trade body chief said.
Moreover, a rise in the advance traders VAT to 3 percent from 2.25 percent at import levels and to 3 percent from 1.5 percent at traders' level will increase commodity prices.
He said all the proposed hikes, like increasing the tolerable level ofVAT at traders' level to 20 percent from 10 percent and 15 percent VAT on rented houses for commercial purposes will push prices upwards.
Additionally, the withdrawal of the cottage industrial facilities and imposing a VAT of 15 percent on chanachur, juice, energy drinks, bidi, gul and jarda will negatively impact the prices.
In its budget analysis, FBCCI said the proposed tax hike from 4.5 percent to 5.5 percent in the construction sector, and 6 percent tax on furniture at production level and 3 percent at distribution level will increase prices in the sectors.
Asking the government to withdraw the regulatory duty on the import of spares parts of capital machinery, Huq said the small and
medium industries would suffer from such a decision.
Huq urged said consumers have to suffer in case the advanced income tax is pushed up to 5 percent from the existing 3 percent.
If the tax on the export of knitwear, woven and other products is raised to 1 percent from the existing 0.25 percent, it will have a negative impact on overall export growth, he said.
Imposing a 3 percent tax on the premium value of shares that are sold at a premium, and the 10 percent tax on the income of listed companies, will have a negative impact on the stockmarket, he said. The premium is not an income of the company, it is absolutely a capital receipt, he added.
Still, the FBCCI greets the budget for proposing increased allocations in the power and public-private partnership sector, he said. These are business friendly proposals, he added.
He praises the proposed budget for allocating Tk 1,600 crore to the Bangladesh Infrastructure Financing Fund, which will encourage investment.
The body also hails the move to set
aside Tk 4,000 crore as subsidies for the agriculture sector.
The proposal to increase the social safety net allocation and climate change fund is also positive, said FBCCI.
"But qualitative implementation of the proposed budget will be a challenge for the government," the outgoing FBCCI boss said.
In response to queries made by journalists, Huq said the finance minister tried to incorporate a "growth-oriented sense" into the budget by targeting a GDP growth rate of 6.7 percent next fiscal year. "But achieving the target would be a big challenge for the government."
Following the higher taxes and VAT in different sectors, he fears inflationary pressures. "But a mild increase in inflation is always good for economy."
FBCCI Presidential candidate AK Azad said loan disbursement in the private sector might be squeezed because of the government's high borrowing from the banking system.
"The government should privatise the loss-incurring state-owned enterprises.”