The government should be pragmatic about addressing the challenges it will face while implementing the budget for the upcoming fiscal year, said the Institute of Chartered Accountants of Bangladesh (ICAB) yesterday.

The country may face the challenges while containing inflation and enhancing domestic investment, utilising funds available through foreign assistance, ensuring timely completion of high priority projects, and finishing the projects in the education and health sectors on time.

The government will also have to increase the collection of value-added tax, raise the number of individual taxpayers, maintain stability in the exchange rate of the taka, and keep the foreign exchange reserves at a comfortable level, said the ICAB.

Additional subsidies might be required for the increased prices of gas, power and fertilizer in international markets.

Any failure to address the challenges properly may destabilise the economy, said Shahadat Hossain, president of the ICAB, at a webinar.

The ICAB organised the virtual discussion styled "Salient Features of Finance Bill 2022-2023 and Macroeconomic aspects of National Budget 2022-2023".

According to Hossain, the causes of inflation at the global level include accelerating prices in trade partners, a spike in oil prices, the depreciation of the taka against the US dollar, the disruption in the global supply chain, and the Russia-Ukraine crisis.

And these are largely beyond the control of the government, he said.

The government is targeting an average inflation rate of 5.6 per cent in the coming fiscal year. And containing the inflation will depend on the fiscal policy and/or monetary policy as well as external elements and influences, according to the ICAB chief.

"However, we have confidence in the government that it can manage inflation rate somehow as targeted."

Hossain said the tax net expansion is essential to improve the tax-to-GDP ratio, which is one of the lowest in the world.

"The government needs to take further steps to expand the tax net."

The ICAB is implementing a document verification system (DVS) in association with the National Board of Revenue. The system is expected to change the financial ecosystem of the country.

"We believe that the implementation of the DVS will help achieve targeted revenue. We also believe that this initiative will ensure transparency and accountability in the financial sector," said Hossain, adding that tax reforms can also contribute to improving the present tax-to-GDP ratio to a new height.

The institute thinks that the introduction of a 12 per cent tax rate for general industries exporting goods and services and a 10 per cent for green factories will encourage diversification of exports of goods and services.

"In addition, integration and changing the definition of research and development, refinement of pre-launch costs and separate provisions for start-up businesses will serve as motivating factors to the new generation business and creative ventures."

The input tax credit on business services, the proposal to increase the VAT rebate period from two tax terms to four, the reduction of fines from 100 per cent to 50 per cent and a maximum 100 per cent, the operation in bonded warehouse electronically are certainly timely and business-friendly propositions, according to the ICAB.

Snehasish Barua, a partner of Snehasish Mahmud & Co Chartered Accountants, and MBM Lutful Hadee, proprietor of Hadee Lutful & Co Chartered Accountants, presented keynote papers on various features of the budget.