A trade off by means of striking a balance between revenue collection and reducing taxes in some business sectors has apparently become a necessity in the wake of the upsurge of the pandemic and its fallout on businesses. This was strongly emphasised by business leaders at the virtual meeting of the Budget Consultative Committee of the National Board of Revenue (NBR) last week. At this important pre-budget meeting, leaders of major chambers and business associations stressed the need for easing business operations by way of, among others, turning a portion of the stimulus packages into grant, particularly for small and hard-hit businesses. They urged the need to reduce the rates of corporate income tax, source tax on export, VAT and other taxes so that businesses can survive amid the fresh wave of Covid-19 outbreak and recover from the ongoing economic slowdown.
The NBR's revenue collection has already marked a downslide. However, in recognition of the severely adverse impact on businesses and employment, the loss emanating from the slowdown and inactivity of businesses is likely to have harsher consequences for the overall economy than tax revenue loss. In fact, the argument for a shift in revenue collection seems rational vis-à-vis the stagnation and losses in almost every business sphere all over the country. The stimulus packages announced last year for disbursement of low interest loans to businesses and industries have actually helped big enterprises, especially those in the RMG sector. On the other hand, a large number of medium and small ones including the numerous trading and service catering businesses in the informal sector have reportedly not been able to avail of the facility. So far, although the government declared Tk 1240.0 billion in the form of stimulus, disbursement position is not yet known. More importantly, the government is in the dark as to the beneficiaries among the SME segment.
In the aforesaid meeting, the FBCCI chief urged for considering grants if lockdown persists in the next quarter. The stimulus fund, ranging from 5.0 per cent to 50 per cent, he suggests, should go to cottage, micro, small and medium enterprises (CMSMEs) and agricultural sector. He also demanded withdrawal of the advance income tax (AIT) from all kinds of businesses for the next two years along with a reduction on VAT. As regards the rate of corporate tax, he suggested, it should be brought down to the minimum level after assessing the cost-benefit analysis for attracting more investment and creating employment.
It is of course up to the NBR to look into the demands. In the pre-budget meetings every year demands are often common for removing undue hindrances and facilitating business operations through fiscal incentives. But the issues being raised now in the harshest business environment are far different from those in normal times. One hopes the NBR examines the demands in the prevailing perspective in which these have been placed.