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Forward-looking but not easily deliverable

Published: June 14, 2019 22:06:20 | Updated: June 16, 2019 22:05:30


There  were  certain vantage points to  budget formulation this time  around  that not all budget-making exercises in the past  enjoyed. Actually,  something of a motivational  spring-board  existed  to  launch an aspiring national  budget  from. First,  it  coincided  with the terminal  year  of the 7th Five-year Plan and the heralding of the 8th Five  Year Plan. Such  was  the richly  endowed perspective  of  stock-taking  and forward-looking  put together   as a  grist to the mill of the 48th  budget-making  process! Add to this the  compelling SDG  time-line to be  adhered to, as the Prime minister in her  press conference  on Friday indicated. With   FY 2018-19 ending on an estimated 8.3 per cent GDP growth rate, the country is  set   to  step up GDP  growth  rates  around   9-10 per cent  to meet the   raft  of  sustainable goals  by 2030. With the  size of the economy growing, 18 per cent increase in the proposed  budget over the revised  version of the outgoing year, according to one expert, is in line with trend. So  aiming high  was  a  necessary  approach   provided that  the budget  were  not be  unrealistically  ambitious going   beyond the  capacity of  existing  mechanisms to implement  it. In fact, looking at the proposed budget and the track-record of  implementation shortfalls  one feels the need for capacity -- building  within the existing   institutional  framework. Of course there is the adage saying  if  one targets the mountain  crest    at least one will  hit  the  tall  tree  but    being  caught up in a  fiercely competitive time-wrap  this may sound like craving for poetic justice.

The second vantage point for the  budget was  the vision  of the election manifesto  envisaging  a welfare  state. All this provided  the directional aspects of the budgetary proposals.    

However,  the  third- term incumbency  of the AL government  and  the maiden budget of a new finance minister  with no election year constraints   raised the hopes that  hard  decisions would be taken   in  respect of black money, non-performing  or classified loans, tax evasion, capital flight, capital market reform   etcetera. Of course, the  finance minister has  proposed  steps to address    some  of  the   problem areas  with  law reforms, creation of administrative   cells  but these are  devoid of  any immediacy of prevention, far less cure. In  fact insofar as  intractable issues go, the prescribed recipes are  long-term, so that  the finance minister's well-intentioned moves happen to be piecemeal  within a yearly cycle. Nevertheless, when the waiver to black money holders  take the form   of  no questions being  asked  while they invest in  economic zones, high tech parks, land, flat and apartments, the fall guys  willy-nilly  romp on to the hall of honour! The provision for a hundred per cent penalty tax against those undeclared  income holders who will skirt the opportunity  is  predicated on a big  'if', namely  if they are detected. What with the  relaxed  rescheduling of  NPLs- currently  under  stay order  from  the High Court -- and  the undeterred explosion of  unearned incomes, there is  a precedents  galore  to  roll back  with  a stern, public spirited demonstration  of   political will. Although  the finance minister has  stressed  the need  for Bankruptcy  and Insolvency Laws that at any rate  have been long overdue, one wonders  whether  these  instruments will come a cropper -- giving  traction  to   the   deeply  entrenched  default culture!

The RMG sector  has  received  a range fiscal incentives. Apart from  01 per cent export  incentive, it will get VAT  exemption  at 5.0 per cent on  WASA  water, and duty exemptions on electricity and safety equipments. Benefits from  communication infrastructure and  avoidance  of   conflict  between VAT and Customs have been stressed. The other pillar of macro-economy, the remittances  are  sought  to be  channelled to the  banking  sector, free from the clutches of  Hundi  operatives  by  subsidizing the remitters. A lump grant  has been  earmarked for the purpose. Significantly, start-up fund of initially Tk 1.0 billion has been set aside for new entrepreneurs. A new enterprise has to wait  for three years to  be eligible for refinancing; now the  time limit will be curtailed. Innovation will be bank rolled with Tk 1.0 million in each case. Having regard for  the growing ranks of educated unemployed, the supportive package  should come as a boon. Furthermore, the   budget speech  has  focused on the  necessity  for a  synergic  interconnection  among  education, technology, skill development, job creation, research and development (R&D). It is believed that automation will   help  expand  industries and services  which in turn will   increase employability. Though allocations to education, health, human development and social security  have been increased, the  raise is  meagre in the face of  increasing  numbers  of recipients, real and potential, remaining outside the pale. There comes the question of a critical mass of people keeping out of the tax net. The proposed budget aims to raise the number of taxpayers from  the current around 2.0 million to 10 million in a year's time. This calls for simplication of procedures topped up by efficient and corruption-free tax administration.  Upazilas will be geared to be a part of a country-wide campaign to sensitize eligible people to pay  tax. If this agenda can be fulfilled it will have done wonders in terms of breaking the jinx of internal resource mobilization. Online Vat System sounds good but there should be clear articulation of the principles to be followed in 'applying VAT at different rates instead of the initially proposed single rate.' Otherwise   complexity may ensnare it.  

One   may  not venture to  think  that even  baby steps  have  been taken to develop the capital market, the stock market to be precise. From that stand point, the resolve expressed to turn the bourses into a source of garnering funds by private  enterprise  across the board for reinvestment is welcome. The  critical dependence on the banking system for credits, a substantial part of which becomes toxic, will have to be  eschewed. To encourage small  investors income up to  TK.50,000 will be tax-free. Doing away with double tax is a step forward. The incentives may be fringe-touching in effect; and for a salubrious impact on capital market intrinsic reform is imperative.

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