Corporate-friendly budget to be impacted WPPF provision adversely: FICCI

The Foreign Investors’ Chamber of Commerce and Industry (FICCI) has termed the national budget for fiscal year 2022-23 as corporate-friendly and said it will impact the Workers Profit Participation Fund (WPPF) provision adversely.

An entity is required to pay WPPF as per the provision of labour law as it is not a dividend rather an expense, a portion of which is also payable to the government. It is an expense not at the discretion of the company but a compulsion.

Moreover, an individual is required to pay tax on it for an amount exceeding Tk 50,000. Disallowing such a legitimate business expense will increase the tax burden of the compliant businesses, the FICCI said in its assessment in an impromptu reaction to the proposed national budget.

However, the business body lauded the budget and expressed gratitude and thanks to the prime minister and finance minister for delivering such a pragmatic budget in prevailing circumstances.

“We are very happy to observe that some of the FICCI’s recommendations were considered in the current Budget, which will definitely have some positive impact on the businesses as well as attract FDI,” it said.

In its assessments, the chamber said that Tk Tk.2,46,066 crore has been allocated in the Annual Development Programme (ADP) targeting to facilitate the quick recovery of the economy despite different external shocks and turmoil in the global supply chain.

The proposed budget aimed at 7.5 percent GDP growth and 5.6 percent inflation rate for the upcoming fiscal year and the chamber feels that the GDP growth target is achievable.

The Chamber also appreciates notable allocation in the health and education sectors, however, concerned about the reduced allocation in the key mega projects, which will slow the implementation and will raise the total cost.

“We feel instead of reducing the allocation in mega-project, the government could concentrate on enhancing the quality of spending, which could bring further efficiency as well as generate employment,” it said.

It also expresses concern about bridging the deficit from banking sources which may tighten the country’s liquidity situation.

It also hailed the government’s initiative to increase the budget allocation in the agriculture, food and fisheries sector, which will make a significant positive impact on the socioeconomic development of the country.

The highest allocation to the social security safety net is a great initiative as the current volatile situation created immense challenges for the poor and middle-class people to ensure their livelihood, however, transparency, accountability, and capacity of the implementing authorities need to be ensured.

The Chamber particularly appreciates the following proposals, made in the proposed budget:

• Corporate tax rate for certain listed and non-listed companies will be reduced by 2.5 percent subject to certain conditions. Corporate tax reduction has become a consistent change in tax policy which is welcoming.

However, upon considering the current economic condition and infrastructure, the proposed cash transaction limit must be increased.

• Tax deduction at source from payment to raw material suppliers will be reduced to 4 percent from 7 percent which will minimise the gap between statutory tax and an effective tax rate.

• The limit for perquisite has been increased from Tk 5.5 lakh to 10 lakh which is welcoming although this is double taxation.