CPD proposes budget for FY21
The Centre for Policy Dialogue (CPD) submitted their national budget proposal for the financial year 2020-2021 (FY21) to the National Board of Revenue (NBR) on Sunday urging to slash individual taxes and not to raise corporate tax.
The CPD proposed expansionary monetary policy to overcome the emerging coronavirus pandemic situation.
It recommended reducing corporate tax for the sectors like pharma, hospitals and other health facilities for the final quarter of the current fiscal year, special financial package for doctors, nurses, and other support staff working in hospitals with corona patients.
Besides, the CPD projected a shortfall of Tk1 trillion in revenue income for the current fiscal year.
It strongly recommended the revenue board to focus on curbing tax evasion and illicit financial flow in the next budget.
"It will be difficult for the NBR to raise tax rates or expand the tax net to include new sectors. The primary focus should be to strengthen monitoring and enforcement mechanisms to effectively curb tax evasion and illicit financial flows," said the CPD in its budget proposal.
The CPD proposed reduction in the import-level duties on essential food items to deal with the coronavirus pandemic.
"Keeping food prices low should be seen as a strategic objective of the NBR in FY2021. Food security of low-income people during the period of uncertainties of the corona outbreak must be attached utmost importance," recommended the CPD.
Besides, it urged the revenue board to reduce import-related tariffs (such as AIT and VAT) on essential food items such as onion, lentil, garlic, ginger and soybean oil etc.
The think-tank in its budget proposal demanded raising the tax-free income threshold for individuals from Tk250, 000 to Tk350, 000 for the next fiscal year.
It also suggested restructuring the first three slabs of income tax from 10 per cent, 15 per cent, and 20 per cent to 5 per cent, 10 per cent and 15 per cent respectively at least for the next two years.
"Moreover, the NBR may consider allowing payment of individual income taxes for FY2020 in installments by March 2021," said the budget proposals.
Focusing on the emerging scenario in the backdrop of COVID-19, the CPD said the shutdown of enterprises, job losses and income reduction would lead to lower income tax collection.
Affected private and multinational companies suffering revenue losses would likely to pay lower corporate tax, it predicted.
Highlighting the economic outlook for the rest of the current fiscal year, it said the budget deficit might increase to 5.5 percent of gross domestic output which was estimated at 5 percent in the budget.
Apart from this, the CPD projected a shortfall of Tk1 trillion in revenue income for the current fiscal year.
It recommended considering several fiscal measures for the affected agro-based industries which could include waiver of VAT at the domestic stage for the period of March-and June this year, deferred payment of quarterly advance income taxes till June, 2020 and payment of corporate taxes by installments till March, 2021.
The CPD urged the government to include deemed exports (exporting below 80 percent of their production) like textiles, accessories, processed and frozen food, footwear, pharmaceuticals, plastic and ceramic under the Tk50 billion stimulus package.
It recommended initiating wealth and property tax and scrapping the existing money whitening facility and introducing a Benami Property Bill in the upcoming budget.
In the proposals, the CPD said during the first eight months of the current 2020-2021 fiscal year major economic indicators of the economy exhibited some worrying signals.
Barring a healthy remittance flow, performance of the external sector had been negative, it said.
Along with the subdued economic parameters, state of macroeconomic management also demonstrated disquieting signals as could be gleaned from available data till date, it said.
Progress in terms of both public expenditure and domestic resource mobilization marked below the targets set for the current 2020-2021 fiscal year, the CPD said further.