Mobile users, FMCG companies miffed as Finance Bill 2020 stays mostly unchanged

Finance Minister AHM Mustafa Kamal must have harked back on that oft-quoted saying of English monk John Lydgate when he was finalising the Finance Bill 2020.

Lydgate had said: "You can please some of the people all of the time, you can please all of the people some of the time, but you can't please all of the people all of the time."

The final version of Kamal's finance bill is of that nature too.

While it brought relief to individual taxpayers amid the hard times, consumers and businesses were left disappointed as the bill was passed in the parliament yesterday without any major changes.

What elicited the most discontent, probably, was his refusal to back down from his proposal to hike the supplementary duty on mobile services, when it has become an absolutely essential service amid the pandemic, by 5 percentage points to 15 per cent.

The carriers implemented the new rate from midnight on June 12, which has taken the customers' total service tax to 33.25 per cent.

Both the operators and users were holding out for a withdrawal of the hike, but those calls went unanswered.

Even Telecom Minister Mustafa Jabbar wrote to Kamal on Wednesday requesting for scrapping the additional SD, pointing out that it would thwart the process of digitalisation. Several other cabinet members and members of the parliament joined in the chorus, too.

"Had the situation been normal, we would have considered many of the proposals put forward by the members of the parliament. But given the situation, we could not take into account the rest of the proposals. I am extremely sorry for this," Kamal said in his concluding speech on the budget in the parliament yesterday.

Similarly, businesses, particularly the fast-moving consumer goods ones, are left disappointed too, as their promotional expenses would have to be reined in.

In an unprecedented move, the companies' promotional expenditure exceeding 0.50 per cent of their turnover would be taxed. Promotional expenses exceeding the cap would be listed as income and therefore, companies will have to pay tax on the expenditure.

In turn, this may increase the effective tax rate from 6 per cent to 36 per cent depending on a profit base range between 5 and 30 per cent, according to Rupali Chowdhury, president of the Foreign Investors' Chamber of Commerce and Industry.

Due to the increase in effective tax rates, non-listed companies, the country's biggest taxpayers, will not be able to take full advantage of the proposed reduction of corporate tax from 35 per cent to 32.5 per cent, she said in a letter to Kamal last week.

The finance minister though made some concessions.

He shortened the lock-in period from three years to one year for the investment of untaxed money in the stock market, in a major change in the income tax for the new fiscal year beginning tomorrow. 

However, submission of a declaration to the tax authorities before the disclosure of undisclosed investment, deposit or cash would be required.

The proposed 5 per cent source tax on individuals' income from zero-coupon bonds has been withdrawn to make the market vibrant. However, there is a tax on such bonds purchased by banks, insurance and financial institutions.

Kamal has discarded his plan to double the value-added tax (VAT) on non-air-conditioned hotels from 7.5 per cent currently to 15 per cent in fiscal 2020-21.

This would give some breathing space to the sector as they have been hit hard by the coronavirus pandemic-induced shutdown.

The duty on calcium chloride, an industrial raw material, has been kept at 10 per cent.

Kamal withdrew the proposal to increase the import tax to 15 per cent from 5 per cent for pharmaceutical raw material colour lex.

A 15 per cent SD has been levied on three-wheelers.

The tax rate on non-residents has been specified at 30 per cent whereas the maximum tax rate for individual taxpayers is 25 per cent. The submission of withholding tax returns by universities, English medium schools and diagnostics centres have been made mandatory.

Changes to another provision of the VAT law that could make it troublesome for firms to adjust input tax credit or claim rebate against paid VAT on inputs have been scrapped.

Until the end of June, businesses would be able to claim tax rebates on the value of inputs purchased and adjust the money with total payable VAT within two months of the purchase of the raw materials and the existing provision continues into fiscal 2020-21.

The provision of depositing 20 per cent of the disputed amount of VAT for filing appeal has been clarified.

The deposit needed for appealing against tax claims before VAT commissioners and appellate tribunals has been hiked from 10 per cent of the disputed amount at present to 20 per cent from next fiscal year.

The current practice is that firms file appeals for revision of VAT claims before commissioners of the respective fields by paying 10 per cent of the disputed amount.

They can then appeal before the VAT Appellate Tribunal of the National Board of Revenue by paying another 10 per cent of the disputed amount.

When they want to seek revision of appellate tribunal verdicts before the High Court, they have to pay another 10 per cent of the disputed amount, meaning that firms have to pay nearly one-third of the total VAT claims to seek justice.

But from fiscal 2020-21, businesses will have to deposit 20 per cent of the disputed VAT amount initially and they will not have to deposit any further money until they seek revision of appellate tribunal verdicts before the High Court.

They have to pay 10 per cent of the disputed amount before appealing at the HC as the current rate is.

As a result, the ratio of total deposit of the disputed VAT claim will not be higher than 30 per cent.

A provision has been included empowering the VAT authorities to extend the time to resolve appeals from two years' deadline.

Kamal said the budget for the next fiscal year has been designed such that it protects the people of the country from the current circumstances brought on by the coronavirus pandemic and ensures economic recovery. 

"People of the country have got the most priority," he added.

The prime minister has unveiled 19 stimulus packages amounting to Tk 103,117 crore to help the people, industries, firms, businesses and farmers tackle the devastating impacts of the pandemic and they are being implemented.

The budget has given the highest priority to the health sector, which received Tk 29,247 crore in fiscal 2020-21, Kamal said. Besides, another Tk 10,000 crore has been set aside to tackle the impacts of the pandemic.

The agriculture sector has also received more attention. "We hope the agriculture sector would be one of the fundamental areas that would take us forward."

Many people, including the marginal farmers, labourers, blacksmiths, potters, fishermen, health workers, van- and rickshaw-pullers, grocers, tea-sellers, micro, small, medium and large businesses, all have been suffering from the impact of the pandemic.

"This budget is for all of them. We did not exclude any individual or group. We would have been able to come up with a smaller budget and budget deficit, had we excluded them. But the truth is very hard and we have embraced the hard truth."

Many expressed concerns that the budget can't be implemented because it is very large, the finance minister said.

"But we are hopeful of implementing the budget."