The Financial Express

'Tax reform elusive, export diversification ignored, job creation less prioritised'

| Updated: June 05, 2021 11:27:25

'Tax reform elusive, export diversification ignored, job creation less prioritised'

Leading economists, analysts and professional forecasters have split over 'a realistic and time-befitting' budget in view of the challenges of Covid-19 pandemic and other factors on the economy.

Some say resources are meagre enough to fight the virus as the block allocation earmarked for Covid-related emergencies remains unclear in a sense that there is no deadline to vaccinate 80-per cent population.

Some levelled it business-friendly as the government slashed or reduced taxes, especially the indirect ones.

They argued for corporate tax cuts both for listed and non-listed companies and keeping tax thresholds unchanged.

They said the budget has rightly prioritised sectors during this pandemic period.

Dr Zaidi Sattar, chairman, Policy Research Institute of Bangladesh (PRI), said the sectors promised are quite OK. "The hills, Covid, social safety net programmes and micro, cottage and SMEs."

He said targets for spending the allocation and managing deficits are quite OK.

The deficit is still 6.2 per cent of the GDP. This is much higher in many developing economies, he stated.

Actually, Bangladesh has three strong footing-export, social progress and prudent fiscal policy, he cited.

Dr Zahid Hussain, an economist, said this is a business-friendly budget in a sense that the government has announced many tax cuts for businesses.

"But my opinion is that this is meant for the domestic market. Export diversification remained ignored."

He said vaccination is most important as the country is now passing through the second wave of the pandemic, adding that there is no time limit for vaccination of 80-per cent population.

Dr Hussain, who earlier served the World Bank, said the picture of any new stimulus packages for SMEs, micro and cottage industries that did not avail of the existing package was not clear.

Dr Masrur Reaz, chairman of Policy Exchange of Bangladesh said the measure for social protection is good as it will help boost the domestic demand.

"Predicting 7.2-per cent growth rate is debatable, given we don't even know yet when the pandemic will end," he said.

The economy would not expand as the government estimated at 7.2 per cent, he observed.

Dr Reaz said inflation target might be right as people's purchasing power has reduced to a large extent as the consequences of the pandemic.

For the common man, he said, the greatest issue is that of jobs and employment. "In my personal opinion, the issue of job creation is more or less ignored."

"In my opinion, I didn't hear any notable changes that would make doing business easier accepting reduction in the corporate taxes."

Dr Masrur said the budget should have allocated funds for conducting reforms to make doing business easier.

Dr SA Hamid, an health economist at University of Dhaka told the FE that the allocation for health ministry is paltry.

"In my opinion, the increase in the allocation is meant for meeting inflationary pressure and other incremental expenditure of the health sector."

Dr Hamid, however, said the block allocation might give a shy of relief for buying vaccines. But he said the required number of doses, an estimated 250 million, is not possible for Bangladesh.

"We don't believe we will be able to inject all 120-million people within a year due to the supply side of the vaccines and required funds."

Dr Hamid said the budget did not address reforms of the health sector which are required for a hassle-free health care system in Bangladesh.

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