Budget 2023-24 at a glance, what could it contain

Budget 2023-24Prothom Alo illustration

The total size of national budget 2023-24 is likely to be Tk 7.60 trillion (760,000 crore). Finance minister AHM Mustafa Kamal will begin presenting the budget in parliament at 3:00 pm on Thursday. He named the budget speech for the fiscal 2023-24 as "Unnayner Agrayatra Periye Smart Bangladesher Abhimukhe" (Towards a Smart Bangladesh after the march of development). He will highlight developing smart citizens, smart economy, smart government and smart society.

The target of income in the budget would be Tk 5 trillion (500,000 crore). Of the amount, the target of income of National Board of Revenue (NBR) will be Tk 4.3 trillion. The deficit in the budget will be more than Tk 2.5 trillion. The GDP growth target in the upcoming budget would be 7.5 per cent while the inflation rate would be 6.5 per cent.

The most talked about issue in the budget is meeting the conditions of International Monetary Fund (IMF). The IMF granted a loan of US $4.7 billion at the beginning of this year. But the IMF has put forwarded 38 conditions that have to be met in the next three and a half years. Nearly half of the conditions have to be implemented by the next fiscal year (2023-24).

Some of the conditions including introducing corridor system for interest rate, adopting proper method to calculate foreign reserve, adopting single exchange rate, and some other are involved with the Bangladesh Bank. Announcement of fulfilling some of the conditions will be made during announcing the monetary policy later in this June while some other would be announced in July. The significant conditions of IMF include increasing the tax revenue and balance of foreign reserve.

Let’s take a glance about what could be included in the upcoming budget:

Increasing the tax free income ceiling

The ceiling of individual’s tax free income is likely to be increased. Currently the ceiling for males is Tk 300,000. This is likely to be increased to between Tk 320,000 and Tk 350,000.

People’s real income has eroded due to high inflation rate, which was 8.9 in average in the first 10 months (July-April) of ongoing financial year. This has eaten up people’s real income. This is why the tax free income threshold could be raised in the upcoming budget.

Expense in plot, flat, personal vehicles to increase

A buyer has to pay different types of taxes during registering flat and plot, for example gain tax, VAT, stamp fee, registration fee, local government tax. The rate remains between 10 and 12.5 per cent. These rates could be increased. Overall the tax rate could be 15 per cent. For instance, if a person buys a flat of Tk 10 million he will have to spend additional Tk 250,000-500,000.

The upcoming budget could bring some bad news for the owners of personal vehicles. If anyone buys second vehicle, he might have to pay added tax like carbon tax. The amount of added tax could be between Tk 20,000-300,000 based on difference in CC. this tax will have to be paid during taking fitness certificate for the vehicles.

The supplement duty for 2001-3000CC cars is likely to be increased from existing 200 per cent to 250 per cent while 3001-4000CC cars will be increased from 350 per cent to 500 per cent.

Increase in travel tax

The government is set to propose in the 2023-24FY budget increasing tax for travelling by air, water and land. In most of the cases the tax would be increased by 50 per cent. People’s travelling will be costlier if the proposal is accepted.

Announcement on universal pension

In the speech of incumbent government’s last budget, finance minister AHM Mustafa Kamal will make an announcement regarding introducing the universal pension scheme.

Sources said the finance division has taken a primary decision to introduce six different schemes for expatriates, private sector employees, labourers, workers from informal sectors, beneficiaries of the social safety net and students. A finance division official said the task is very complex. It is not possible to introduce the universal pension scheme on a compulsory basis before 2028. Until then the scheme will be optional. That is why there will be no allocation in the sector in the upcoming budget.

Social safe net allowance to increase

The forthcoming 2023-24 budget will increase the allocation in social safety net programmes. With this the amount of allowance will also increase (from Tk 50-100 per head) in some programmes after seven years. The number of beneficiaries will increase along with the slight raise in allowance.

The allocation in the social safety net in the budget of 2022-23 financial year was over Tk 1.13 trillion (113,576 crore). The financial division sources said the amount could be increased to over Tk 1.26 trillion (Tk 126,200 crore).

There will be eight schemes for the cash assistance in the upcoming budget. The amount in the schemes will be increased by Tk 30 billion.

The eight schemes are: allowances for the widow, deserted and destitute women, allowances for the financially insolvent disabled, programme for improving the livelihood of transgender (hijra), bede and disadvantage common unity, oppressed women and children, honorarium for freedom fighters, honorarium and medical allowances for injured freedom fighters, and pension for retired government employees and their families.

Allocation to increase for food security

Tk 154.08 billion have been allocated in 11 categories of food security and employment creation programmes such as TR, GR, VWB, OMS, food friendly programme, VGF and so on in the current fiscal. The allocation for these programmes may increase by Tk 20 billion. Through these programmes, the government sells rice and atta (flour) at low prices to the people. Again, various projects are undertaken in the rural areas to create employment opportunities.

The allocation for stipend of students in the budget may increase by Tk 1 billion. At present, the allocation for this sector is Tk 44.17 billion. However, the amount of scholarship at the individual level will not increase.

Prices to increase or decrease

A Proposal can be made to impose VAT at the manufacturing level of mobile phones in the local companies. Companies that would manufacture machinery, equipment and also manufacture mobile phones may have to pay 3 per cent VAT. Companies engaged in the production of at least two mobile phone parts will be required to pay a 5 per cent VAT, whereas the previous rate stood at 3 per cent. Meanwhile, entities involved in importing all the parts and conducting assembly within the country will be subjected to an increased VAT rate of 7.5 per cent, up from the previous 5 per cent. Consequently, the local market may witness a possible escalation in smartphone prices as a result of these revised VAT rates.

On the other hand, VAT may be levied and increased at the manufacturing stage of some products. For example, 5 per cent VAT on pens may be proposed. Additionally, VAT rates at the production level for household items such as tissues, napkins, plastic tableware, and kitchenware may be raised from existing 5 per cent to 7.5 per cent. Moreover, supplementary duty rates on imported fans might see an increase.

Apart from this, it may be proposed to increase the price and duty of all types of cigarettes. On the other hand, tax rate may be increased by 1 per cent to 3 per cent for the cigarette companies that pay turnover tax.

For importing bicycle parts, a 15 per cent tariff can be imposed under local industry protection. Apart from this, the import duty may be increased from 5 per cent to 25 per cent for importing computer software. This can have a positive impact on the local market.

Similarly, supplementary duty may be increased for import of refrigerators. Additionally, VAT exemption for local fridge-refrigerator manufacturers will continue.