Budget 2024-25: More discomfort than relief

• Tax-free income ceiling remains unchanged

• The list of products seeing price drop is too short

• More tax on legal money, less on black money

Arifur Rahman, a private company employee, never paid much attention to the budget sessions. However, he makes it a point to check the lists of products seeing price drops or price hikes. This is all that he cares about. This year, the budget was quite frustrating for him as the number of products seeing a fall in price is only a few. It was more discomfort than relief for him.

Speaking to Prothom Alo, Arifur Rahman said, “I have been struggling to run my family over the last two years. The costs of daily commodities have been rising constantly. I was expecting the budget to give some relief as living costs have soared. However, it was quite frustrating.”

VAT and tax have decreased on some products in the new budget, including powdered milk, imported clothes, laptops, water purifiers and dengue kits. Powdered milk is the only product on the list that matters for Arifur. Even for that, the government had to rebate the supplementary duty on the import of powdered milk by 20 per cent.

However, the list of the products likely to see price hike is quite long, including many products and services that matter for Arifur. For instance, he takes his son to amusement parks on holidays. Now he will have to pay extra for that. Even if the child wants an ice-cream, that will cost him some extra money. He will have to readjust his budget from top to bottom to cope with the burden of extra expenses on almost all daily commodities.

An additional VAT (value added tax) has been imposed on refrigerators at production levels. Besides, a 7 per cent VAT has been imposed on domestically produced air-conditioners. Although Arifur has a refrigerator, he was planning to buy an air-conditioner after suffering a lot due to the unbearable heat waves this year. However, he has postponed his plan for now due to the additional cost he will have to bear to purchase an AC.

Arifur, nevertheless finds a little relief in the long list of products to see price hikes. He was happy with the proposal to increase the supplementary duty and price level of cigarettes in the budget as he doesn’t smoke. He was also satisfied with the rise in the excise duty on the deposits of the rich.

Arifur was talking over the phone. At one point he said, “We cannot even talk long over the phone from now on. Mobile call rates will spike following the new budget as the finance minister proposed to raise supplementary duties on internet and mobile call rate."

This correspondent then spoke to a young entrepreneur. He was criticising the opportunity to whiten black money. Speaking on condition of anonymity, he said, “How could the people who have undeclared money be given the chance to whiten their money by paying less tax than the legal tax payers?”

“The finance minister proposed a new tax bracket at the highest rate of 30 per cent for individual taxpayers, which means people will have to pay a 30 per cent tax against their legal income while those having undeclared money will have the opportunity to legalise their money by paying a 15 per cent tax,” he said.

The finance minister has announced that there would be scope to legalise or whiten any amount of cash by paying a 15 per cent tax against it without facing any question. Similarly, undeclared money can be legalised by purchasing lands, flats or apartments and paying tax against it depending on the area.

However, this opportunity to legalise undeclared money through purchasing flats or apartments will benefit the construction material and real estate businesses as the additional investments will boost this sector. At the same time, it will create a surge in the demand for construction materials. The people in the construction material industries are also quite happy with this decision, two entrepreneurs in these sectors said.

Although, there is dissents among the businesspersons regarding the budget, they are all on the same page on a few issues such as initiatives to be taken to tackle the dollar crisis, rise in the dollar transaction rate and to rise from a dilapidated banking sector. They are more concerned about these questions. The finance minister, however, could not provide hope regarding these issues.

The businesspersons are not seeing that much hope either. Speaking regarding this Sea-Com Group managing director, Amirul Haque said, “What we needed most at the moment was to stress on how to grow both export and remittance. There was no package on this. Instead of that, we are becoming more dependent on bank loans to cover the budget deficits, which is quite unexpected given the vulnerable situation in the banking sector. If the government itself becomes dependent on the banks, then where will the entrepreneurs go?”

However, the decision to reduce the tax rate to 25 per cent for companies not enlisted in the share market was taken well by the business communities. They are considering this as a positive step ahead, he added.

Amirul Haque further said, “I am quite disappointed that a new tax has been imposed on capital gains (profits). He is highly concerned that there might be some falls in the stock exchange in the coming days.

Let’s get back to Arifur again. He knows that the national budget is an account of the state’s expenditure and income. The government first selects sectors for budget allocations, then finds the source of the money. However, it’s quite the opposite for him. He spends in compliance with his income. However, it’s going to be a hard time for him in the coming days to cope with price hikes following the budget session.