Dhaka,  Monday
24 June 2024

Living cost to rise in upcoming budget

Sanjay Adhikari Rony, Dhaka

Published: 07:31, 22 May 2024

Update: 21:55, 22 May 2024

Living cost to rise in upcoming budget

Photo: Messenger

A 15 per cent VAT will be levied on many products in the next financial year 2024-25. As a result, the VAT rate will be 15 per cent at every step from production to consumer level. As VAT money is paid from people's pockets, the cost of living will increase, economists and experts think.

A phased withdrawal of VAT exemptions in certain sectors is planned, as is the uniform rate of VAT. At the same time, the benefits of income tax, customs sector, including revenue exemption, will be removed step by step. Besides, there is pressure from the International Monetary Fund (IMF) on the National Board of Revenue (NBR) to limit tax exemptions. The government is also trying to strengthen the internal revenue sector.

Dr. Muhammad Abdul Mazid, the former chairman of NBR, told The Daily Messenger, “This is the first year of the new government. Any kind of strong action should be taken in the first year itself. It is better if various steps or reforms can be done at this time. In the following years, many things came to the fore. It is then a bit difficult to take fiscally bold steps. So, the tough decisions should be taken this year to increase the revenue.”

As per the IMF target, the NBR aims to collect VAT of Tk 1 lakh 70 thousand crore next year. Compared to the current year's target, this is about Tk 26 thousand crore more.

It is known that in the budget proposal for the next financial year, NBR proposed to impose 15 per cent VAT against all types of goods and services. However, Prime Minister Sheikh Hasina has directed to impose 15 per cent VAT on some products instead of all goods and services in the next financial year.

An NBR official said on condition of anonymity that the government is moving towards implementation of standard VAT rate of 15 per cent. “However, it will not be implemented in all cases in the next financial year. Its implementation will be phased.”

The official also said that the Prime Minister has given positive approval to the proposal to impose additional duty on mobile phones. As a result, the consumer will have to pay extra to talk on the mobile phone. At present, a consumer can talk about Tk 83 if he recharges his mobile by Tk 100. The mobile operators deduct the remaining Tk 27 as VAT and supplementary duty. If the supplementary duty of mobile services is increased by 5 per cent, the consumers will be able to talk about Tk 78.

According to NBR sources, currently some locally manufactured electronics products are getting tax exemption or reduced tax rate. NBR is planning to increase value added tax (Musak or VAT) on these in the next budget. This may include products like refrigerators, ACs, mobile phones and LP gas cylinders.

Apart from this, the rate of VAT on some sugary juices may be increased to 15 per cent. The minimum tax rate on annual sales or turnover of juice manufacturers may also increase. Apart from this, the pressure of VAT is coming on cigarettes, bidis, jorda, and gul too. The price level of each cigarette is increasing from low to high quality. Due to this, the price of all types of cigarettes will increase.

Currently, the VAT rate is 5 per cent at the manufacturing level for refrigerators, 2 to 7.5 per cent for mobile phones based on the amount of value addition, and 5 per cent at the selling level. In case of refrigerators and mobile handsets, VAT may be increased by more than two percent. VAT may also be slightly increased on LPG cylinders. On the other hand, prices and supplementary duties on tobacco products may increase further.

SM Nazer Hossain, vice-president of Consumers Association of Bangladesh (CAB), told The Daily Messenger, “We have been demanding the increase of income tax from NBR for a long time. As the burden of VAT falls on everyone, it increases the suffering of the common people. We were asking not to increase VAT for this. But NBR is not listening to us.”

He also said that people are already facing high inflation for the last two years, which has reduced their real income. Among these, the government has collected additional money as VAT on many daily necessities. A new imposition of VAT will be unbearable for low-income earners.

Meanwhile, MPs can import cars at duty-free facility if they are elected as MPs. However, the Prime Minister has agreed to cancel this benefit in this year's budget. MPs will have to pay 25 per cent supplementary duty as well as 15 percent VAT to import cars.

Imported cars for hi-tech parks have also been getting duty-free benefits for a long time. However, this time the Prime Minister has given instructions for imposition of duty. Although this rate is not fixed, it will be higher than the duty rate imposed on MPs. In addition, the Prime Minister has given instructions to withdraw the duty-free benefits of BEZA-BEPZA to some extent.

In this regard, FBCCI President Mahbubul Alam told The Daily Messenger, “We want a business and investment friendly budget. Hopefully, the government will make such a budget. Nothing more can be said at the moment before the official announcement of the budget. Because, many things in the budget can be dropped or added at the last time.”

Despite rising inflation, the tax-free income limit of individuals is not increasing in the next fiscal year's budget. In the latest fiscal year budget, the tax-free income limit has been increased from Tk 3 lakh to Tk 3.5 lakh. However, NBR is planning to collect additional tax from the rich to increase the revenue. Currently, the top tax rate for individual taxpayers is 25 percent. Income tax at the rate of 25 percent is payable if the annual income is more than Tk 16 lakh. It is being increased to 30 percent.

AB Mirza Azizul Islam, Finance Adviser to the former caretaker government, told The Daily Messenger, “Inflation is increasing. Common people are suffering. The next fiscal year's budget should give top priority to controlling inflation. Various benefits should be given to agricultural production. At the same time, concessions should be given to the import of food products. Strict measures should be taken to control inflation.”

He also said that the size of the budget is being increased. Along with that, the revenue collection target of the NBR is being raised to match the paper accounts, which is an ambitious plan. Increasing the revenue target is increasing the pressure on the common people. As NBR sets high targets for revenue collection, the economy is getting out of balance. The government should move away from this clause and take into account the actual situation and plan the revenue from internal resources in the next financial year.

It should be noted that the target of revenue collection in the next budget has been set at Tk 4 lakh 80 thousand crores. In the current budget, this target was set at Tk 4 lakh 30 thousand crores. Later the revised target was fixed at Tk 4 lakh 10 thousand crores.