Dhaka, Jun 2 – Centre for Policy Dialogue (CPD) on Friday feared a hike in production cost and consumer expenditure, and a rise in inflation in the coming fiscal year due to the proposed overall tax structure hurting the overall growth.Presenting the CPD analysis on the proposed budget, Dr Debapriya Bhattacharya, a macro-economist and public policy analyst, said tax burden largely on lower and middle-income people will increase due to the proposed tax structure for the fiscal year 2017-18.
He said it is not ethically right to impose more tax burden on honest taxpayers without taking effective steps against those who are out of the tax net, who are siphoning off money or purchasing assets abroad.
“We agree with the expectation and desire of the proposed budget. But the budget lacks specific directives on how to implement it. We expect concrete planning and directives from the Finance Ministry and Planning Commission soon,” said the CPD distinguished fellow presenting the CPD analysis on the proposed budget at a city hotel.
CPD Executive Director Dr Fahmida Khatun conducted the event.
There is little scope for enhancing the delivery efficiency of this budget, and one will have to get the political economy right in this regard, said the CPD, a globally reputed think tank in Bangladesh terming the proposed budget an economic illusion.
“The time for that may have come and gone. Yet, the Ministry of Finance needs to come up with a bold implementation plan, building on some of the ideas mentioned in the budget,” Dr Debapriya said.
The economist said there is lack of information in the proposed budget in certain areas and the burden on honest taxpayers will increase.
Expressing doubt over the proposed 7.4 percent GDP growth in the coming fiscal year, Debapriya said private investment as a share of GDP is expected to rise by 0.2 percentage points only.
“An additional (approx.) Tk 66,000 crore private investment will be required in FY18 and also an additional (approx.) Tk 50,000 crore will be invested by public sector,” he said.
He said only having growth is not enough but the growth must be ‘inclusive’ in line with the idea one is left behind.
“Job creation is needed at the root-level, which is not happening,” said the CPD economist explaining his doubt over the 7.4 percent GDP growth.
Debapriya said it is very difficult to implement budget in Bangladesh in an efficient way only through administrative system.
He expressed displeasure for the Finance Minister’s less attention to the banking sector and having a stronger capital market.
VAT and SD (Supplementary Duty) Act 2012 will come into force from July 1 and uniform and single VAT rate has been proposed to continue at 15 percent for the next three years.
Debapriya said the Finance Minister did not clearly mention whether the rate will be changed or brought down after three years.
The VAT-free annual turnover threshold has been raised to Tk 36 lakh from Tk 30 lakh. Earlier, business has to pay package VAT for the annual turnover of Tk 30 lakh.
Responding to a question, former CPD Executive Director and its distinguished fellow Prof Mustafizur Rahman said any budget of a democratic government can be seen as pro-election and people-welfare oriented one.
However, he expressed displeasure over the proposed tax structure and mentioned that many products are kept out of VAT while proposing 15 percent VAT for the next three years.
Prof Mustafiz laid emphasis on boosting budget implementation capacity and mentioned that the country will be deprived of desired results if expenditure is not done properly.
CPD in its analysis showed that in case of direct taxes – income, corporate, wealth surcharge – no notable change has been proposed in the proposed budget FY18.
Considering inflation since FY16, the inflation-adjusted value of the threshold amount is about Tk 280 thousand but the tax exemption threshold for personal income remains the same at Tk 250 thousand, it observed.
It said there has been no change or deletion of provisions about the facilities given to invest or disclose black money.
“Once again, the Finance Minister didn’t mention anything about black money in the budget speech,” the CPD analysis reads.
CPD said the inclusion of such provision (allowing black money) in the ordinance is morally unethical for honest taxpayers and might encourage people to evade tax. – UNB
