ICAB’s Virtual Media Briefing on National Budget 2020
The proposed budget is ambitious and challenging because of the coronavirus pandemic but the government would be able to implement it. Finance Minister AHM Mustafa Kamal has presented a Tk 568,000 crore timely and large budget for the next fiscal year, leaders of the Institute of Chartered Accountants of Bangladesh(ICAB) said at a virtual media briefing.
The professional Institute has organized a virtual media briefing on Saturday, 13 June 2020 just one day after the accouchement of the National Budget 2020 on Thursday.
"The implementation of the proposed budget would be difficult but it is not impossible," the president of the Institute Muhammad Farooq FCA said. The main challenge would be achieving the revenue generation target and getting private investment due to the shrinking aggregate demand amid the raging pandemic. The finance minister's endeavor to boost private investment and create employment is welcoming, Mr. Farooq said while reading out a written speech during the media briefing.
The finance minister talked about widening the government's reliance on domestic sources in FY21 in order to meet the budget deficit. Kamal has proposed to borrow Tk 84,983 crore from the banking sector to finance the deficit budget.
In the current fiscal year, the government has borrowed from the banking sector nearly double the amount it originally targeted. Similarly, the target on bank borrowing would overshoot as the fiscal year progresses, said Mr. Farooq.
"Because of the government's reliance on the banking sector, the private sector may be deprived of adequate financing. However, if the government spends the money properly for the development sector, the money would come back to the private sector through money circulation." The government needs to boost economic activities in order to mitigate the impacts of the Covid-19 on the economy and create jobs for the unemployed populace, he said. "So, we are not looking at the reliance on the banking sector for loans negatively subject to the implementation capacity." A structural change in the budget compared to traditional budgets in the time of the crisis is noticeable, he said.
The health sector has been given the utmost importance and the agriculture sector has been given the second most importance with a view to ensuring food security during and after the pandemic. A huge portion of the population has lost jobs because of the long general holiday and lockdown and slid below the poverty line. "The additional allocation in the budget to provide a social safety net to this group of people is logical," Mr. Farooq said.
The increase of tax-free income threshold and introduction of a new 5 percent slab would reduce the tax burden for the marginal taxpayers to some extent, he said. Similarly, the cut in the corporate tax rate, which is one of the highest in South Asia, would give some relief to the companies that have been affected economically by the pandemic.
The ICAB called for bringing down the tax at source for the professionals from 10.12 percent to 8 percent. Cutting the advance tax at the import stage on raw materials used in local manufacturing industries to 4 percent from 5 percent is a business-friendly initiative, according to ICAB.
Attaining the revenue collection target would be a major challenge because trade, commerce, industries, import, export, and services have all been affected severely by the COVID-19, said Md Humayun Kabir, a former president and Chairman of TCLC of the ICAB. "budget financing will be a major challenge.", he added.
The government's attention will be diverted to the health and social safety net sectors in FY21 because of the pandemic, so the supervision and monitoring of the development sector would be hit, according to Mr. Kabir.
The Institute found rationality in widening the areas of investment for undisclosed income in view of the current unusual situation, he said. "However, it is expected that this extraordinary measure will not be continued beyond the stipulated year. Replying to a query Mr. Kabir said, " Setting an 8.2 percent GDP growth target is puzzling to many as demand is shrinking. It sounds unrealistic."
In order to curb the trade under-invoicing, the provision for the imposition of penalty at 50 percent is a laudable move according to the ICAB. However, it will require the judicious application of the law at field level so that normal business transactions are not arbitrarily valued for the imposition of such penalty, it added.
The finance minister's proposal to increase the deposit to 20 percent from 10 percent on disputed tax amount before filing an appeal with the Appellate Tribunal and the Appellate Commissionerate would increase the cost of businesses, said Snehasish Barua, a member of the institute. Parveen Mahmud, a former president of the ICAB, and Md Shahadat Hossain, a Council member of the ICAB, also spoke.
ICAB Vice President Sidhartha Barua FCA, Sabbir Ahmed FCA, and Mohammed Forkan Uddin FCA, Past President Md. Abdus Salam FCA, Secretary Major General Muhammad Imrul Quayes, ndc, psc (Retd), Director (Technical) Mahbub Ahmed Siddique FCA attended the media briefing.