Crisis acknowledged

The finance minister's budget has acknowledged the crisis that looms large. In the chapter on 'Global crisis and the challenge for Bangladesh', he mentions 'salt being rubbed into the wound'. He said that import costs have gone up, remittance has gone down, there is inflation, and the government's subsidy management is under unprecedented pressure. He mentioned a few strategies to overcome the crisis, but the problem is in implementation.

In his budget speech, that finance minister said that the challenges must be tackled very strategically. After all, if one certain problem can't be resolved correctly, this can have damaging repercussions on the macro-economy.

He said, "Our main strategy will be to reduce the present demand growth and increase supply. That means import-dependent and less important public expenditure will be stopped or curtailed. Implementation of low priority projects will be slowed down and, at the same time, implementation of the mid and high priority projects will be accelerated. The price of energy fuel, gas, power and fertiliser will be adjusted gradually and on a small scale. In order to strengthen the revenue collection drive, collection will be brought under an automation process. The Value Added Tax and income tax net will be expanded. Import of luxury and non-essential items will be discouraged and under or over-invoicing will be carefully monitored. The taka exchange rate against the dollar will be kept at a competitive level."

The present global crisis has been created by supply. And inflation has increased due to the supply crisis and expenditure. The finance minister did not explain how demand will be reduced to overcome the crisis. And if this is reduced, then there will be apprehensions on how to achieve the 7.5 per cent GDP growth target set by the finance minister. After all, the basis of the country's GDP is spending and consumerism.

Massive budget under spending pressure

On the day the budget was presented in the US last year, President Joe Biden tweeted, "Don't tell me what you value, show me your budget and I will tell you what you value.' That means it is not just enough to declare a budget. It is more important where the money is spent. Therein lies our finance minister's crisis.

Almost all the revenue expenditure goes in the payment of salaries, allowances, grants and aid, subsidies and interest. And this time the finance minister is having to struggle with subsidies. In the current 2021-22 financial year, allocation for the subsidy sector was Tk 535.82 billion (Tk 53,582 crore). Subsidy costs on oil, electricity, gas and fertiliser have gone up due to increased prices in the international market. As a result, the allocation in the revised budget will be Tk 66,825 crore taka. And in the new budget that will increase further to Tk 82,745 crore. The finance minister said, given the present trends, expenditure in this sector may go up even further by 15 to 20 per cent. He admitted that this was a major challenge in the budget management of the 2022-23 fiscal.

The finance minister has had to come up with another massive budget under the pressure of expenditure. Under the proposed budget, expenditure has been fixed at Tk 6 lakh 78 thousand 64 crore. Of this, Tk 4 lakh 11 thousand 406 crore is in the non-development sector and the remaining Tk 2 lakh 59 thousand 617 crore is development expenditure. The overall deficit in the finance minister's budget is Tk 2 lakh 45 thousand 64 crore and a large portion of this will come from domestic sources. That includes a maximum Tk 1 lakh 6 thousand 334 crore from the banking sector. In the revised budget of the current fiscal this borrowing was supposed to be Tk 87 thousand 287 crore. The question is, if the government borrows such a huge amount from the banking system, how much will be left for the private sector?

In the new financial year, Bangladesh will have to repay Tk 17,000 crore in foreign debts. And the government will have to pay around Tk 19.2 per cent of the non-development budget to pay interest on domestic and foreign loans. Other than this, of the total expenditure, 17.7 will go to the salary and allowance sector, 17.2 per cent for subsidies and stimulus and 16.1 per cent to aid grants.

After spending all this, there will be very little left in the finance minister's hands. Income isn't increasing at the rate of expenditure. The finance minister has, though, taken credit for increasing revenue income in this budget comparison to the past. The revenue target in this 2021-22 financial year was Tk 3 lakh 89 thousand crore. The finance minister said, not a single taka was lessened in the revised budget, that means, the entire revenue collection target will be achieved.

At the same time, he himself said that till last March Tk 2 lakh 70 thousand 639 crore has been collected. That means in the last three month another Tk 1 lakh 18 thousand 361 crore has to be collected. The question is, how much will actually be collected finally. Based on this, the finance minister has drawn up the budget for the new financial year with a massive revenue target to Tk 4 lakh 33 thousand crore. So the common people will bear the brunt of this tax pressure.

Tax pressure to increase

Many years ago Benjamin Franklin had said, "In this world, nothing is certain except death and taxes." Many people joke about this, saying death comes but once, but taxes come around every year. As it has this time too.

As always, the finance minister's budget speech lengthy too. It had 172 pages with 343 chapters. In Chapter 114 the finance minister elaborated the revenue details. Never in the past had any of the finance minister used so many pages on the revenue regimen. Perhaps the finance minister will take Benjamin Franklin's words to heart and made taxes a constant in people's lives. With a slight sense of despondence the finance minister commented, even though the middle class and above total around 40 million (4 crore) in the country, most of them do not pay taxes. The finance minister has placed emphasis on income tax in the budget.

The finance minister mentioned that tax exemption was the main obstacle to improving the tax-GDP ratio. He has curtailed the rate of tax exemption in the budget but has kept the tax-free income ceiling at Tk 300,000 as before. He has given in to the demands of the business circles and has lowered corporate tax by 2.5 per cent, conditionally. That means, to avail corporate tax facilities, all transactions must be done through the banking system. Those who avoid bank transactions in order to evade taxes, will not be pleased with this.

Again, TIN used to be enough to avail several types of government service or in the case of large purchases. But the finance minister has made the life of these TIN holders tough too. According to the new budget proposal, now attestation of the returns has to be submitted to avail 38 types of services. This includes for loan applications of over Tk 500,000, buying Savings Certificates of over Tk 500,000, getting a credit card, becoming a director or shareholder in any company, becoming a member of any business association, sending one's child to an English medium school, getting a firearms licence, etc.

In 1996 after Awami League came to power, in order to expand IT, all types of duty were withdrawn from computers. The finance minister has changed that. He has placed tax on the import of laptops. Wealthy businessmen have taken up gold business in the country. The finance minister has facilitated them by withdrawing advance tax in gold imports. And he has come up with special concessions for those siphoning off funds abroad, those who have bought homes and other assets overseas. If they bring back money they took abroad or declare this and pay taxes, the finance minister said this will be accepted with no questions. The question arises, for whom is this scope being made in the year before the election? The finance minister is being praised for measures such as disconnecting the power, water, gas and other utility connections of VAT defaulters and for steps for loans defaulters to pay tax.

The finance minister has placed everything on the shoulders of the common people. He said, "The lifeblood of our economy is the ability of our common people to turn around as well as strong and bold leadership."

The finance minister has said, he has taken certain matters into consideration in drawing up these tax proposals. These include reviving the pandemic-hit economy, creating investment and employment, saving foreign currency, diversifying export-oriented industries, stimulus to backward-linkage industries, developing the health, agriculture, fisheries, livestock, electronics, ICT sectors, expanding heavy industries, making business easier, increasing foreign exchange and developing local industries.

Budget presentation

The parliamentary session began at 3:00pm Thursday afternoon. presided over by Speaker Shirin Sharmin Chaudhury. Then the finance minister AHM Mustafa Kamal rose to present the budget in the parliament.

He said, he would present the budget by means of the audiovisual media and took the Speaker's permission to present it in this manner.

President Md Abdul Hamid sat in the gallery reserved for him and watched the budget presentation. Earlier in the afternoon, the budget had been approved at a special meeting of the cabinet in the Sangsad Bhaban. Later President Md Abdul Hamid signed the proposal.

In conclusion

As always, this time too the biggest challenge is implementing the budget. This challenge has been made even more difficult by the global crisis. People want relief from the situation, they hope for a decrease in living expenses. And the finance minister has placed everything on the shoulders of the common people. He said, "The lifeblood of our economy is the ability of our common people to turn around as well as strong and bold leadership." So the common man will now have to think like the poet Mirza Ghalib who wrote, " The skies turn across heaven day and night. Something is bound to happen, so why should I worry?"

* This commentary appeared in the print and online edition of Prothom Alo and has been rewritten in English by Ayesha Kabir

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