FICCI acknowledges tax reforms, calls for enhanced digital transformation of NBR: FICCI president

The Foreign Investors Chamber of Commerce and Industry (FICCI) has expressed gratitude to Finance Minister Abul Hasan Mohammad Ali for presenting the National Budget for the fiscal year 2024-25 in the National Parliament on Thursday.

FICCI said it closely examined today’s announced National Budget and commended the government's efforts in crafting a comprehensive fiscal plan that addresses critical economic challenges while fostering a conducive environment for business growth. With a keen focus on containing inflation, reducing aggregate demand, and nurturing the supply side of the market, this budget lays a strong foundation for stabilizing the economy.

The budget outlines several measures to control inflation and stabilize the economy, including tightening monetary policy by raising interest rates to 8.5%. The Standing Lending Facility (SLF) and Standing Deposit Facility (SDF) rates have been set at 10% and 7%, respectively, to curb inflation by reducing money supply and encouraging savings. Additionally, substantial investments aim to boost agricultural productivity by 20% and industrial output by 15% through technological advancements and infrastructural improvements. This is expected to balance demand and supply, thereby stabilizing the economy.

The chamber appreciated the following proposals made in the proposed budget. However, it said it believes that there are some issues which should be addressed. 

A standout feature of this budget is its progressive business-friendly approach, focusing on reducing costs for consumers. The emphasis on a predictable tax system is appreciated, meeting long-standing demands. The introduction of a prospective corporate tax rate enables accurate tax planning for businesses. The proposal to reduce the corporate tax rate for companies not listed on the stock exchange from 27.5% to 25%, subject to compliance with cash transaction conditions, is commendable. It is expected that the proposal to reduce the tax rate will encourage private investment.

The budget reflects a progressive approach by focusing on tax reforms that simplify and clarify the tax regime. This includes expanding the tax base by 25%, introducing electronic fiscal devices, and promoting e-payment systems to streamline tax collection and reduce costs. The number of taxpayers is expected to increase from 2 million to 2.5 million, creating a more business-friendly environment and ensuring greater tax system predictability and transparency. By enhancing direct taxes and implementing the Electronic Tax Deduction at Source (E-TDS) system, the budget aims to improve tax compliance and reduce evasion.

However, the budget lacks allocation or specific directions for the automation of Tax, VAT and customs administration, which would increase efficiency and simplify the tax collection process. The absence of such reforms means the complexities related to VAT credit and potential financial strain on businesses will persist. Continuous reforms are necessary to ensure that VAT processes are streamlined, reducing the administrative burden on businesses and encouraging compliance, which will ultimately support economic growth.

Acknowledging the strides made in this budget, FCCI said it believes higher allocations in health and education would have further underscored the government's commitment to human capital development. The health sector received an allocation of 8% of the total budget, while education was allocated 12%. Enhanced funding in these areas would support better healthcare services and educational opportunities, leading to a more skilled and healthy population, which is essential for sustainable development. Experts suggest that allocations of 10% for health and 15% for education would be more appropriate to meet the growing demands and ensure quality services.

Additionally, resource allocation for the digitalization of the National Board of Revenue (NBR) is imperative in enhancing efficiency and transparency in tax administration. Investments in digital infrastructure amounting to 500 million BDT have been allocated for this purpose. This includes the implementation of advanced data analytics, electronic tax filing systems, and improved digital interfaces for taxpayers. This digital transformation is vital for achieving the budget's revenue targets and supporting overall economic development. The goal is to increase the tax-to-GDP ratio from the current 8% to 10% over the next three years. -Press Release-