For most people the annual budget brings no cheer. What, however, keeps them looking for is a status quo -- continuation of their existing state of living, and no more hassles. Commoners remain concerned with chances of price hike of daily necessities, while businesses - big and small alike -- worry over the new taxes coming their way. This more or less defines the pre-and-post-budget thinking of citizens, not just in our resource-scarce land but in most other countries -- rich or poor.
Compounded with these what has lately emerged in Bangladesh is a sense of insecurity -- of money kept in banks. People keep their deposits in banks to ensure safe custody and any interference and swoop on the hard earned money is intimidating enough to make their life miserable. The proposed budget for the financial year 2017-18 has already done that to millions of depositors, especially small depositors, all over the country by proposing to raise excise duty on bank-account balance. Depositors having bank-account balance of as little as Tk 0.1 million will have to pay Tk 800 a year for maintaining that bank account.
The question that baffles Economists is the sheer absence of any economic rationale behind imposing the excise duty on deposits. While there is the provision of deducting tax at source, and banks are strictly following it, an additional excise duty tends only to justify the capricious might of the state power that be. Eminent Economist Ahasan H. Mansur has aptly termed it dine dupure dakati (robbery in broad daylight). In an interview with a local daily, he called it a step backward and indeed exceptional from the economic point of view. As he said, the dual impact of slumping interest rates on deposits and rise in taxes has already put small dezpositors in a difficult situation, and now with more levy in the form of unjustified excise duty there is no respite for them to look up to. Besides, this move, if implemented, would result in adverse fall out on the economy in the form of what he said 'shadow economy'. This, he stressed, would affect bank transactions, and transparency could be the likely casualty. Worst, it would promote opening up of illegal transaction channels, he added.
The only logic that one may, however, find lies in what the finance minister said in a post-budget briefing. When asked about taxing the depositors with excise duty, that too those with just Tk 0.1 million, the finance minister reportedly said that he considers persons with Tk 0.1 million bank balance resourceful enough to take the load.
The reason this scribe picked up the issue of the proposed budget is the unrelenting clamour it has been causing over the past few days. Actually, it did come up in public discourse before the finance minister's budget speech, particularly in the social media. The uproar on the issue, no doubt, is a glaring example of what affects the people most. Isn't it the responsibility of the government to move cautiously, lest its actions, even proposals, tell upon the most sensitive chords of the citizen's psyche. It is thus not understood why the NBR suggested this. The additional amount that the measure is likely to generate is a meagre Tk. 6.0 given the huge revenue collection target in the next fiscal. Curiously enough, there are quarters who question the very legitimacy of excise duty in a VAT regime. Mr. Ibrahim Khaled, former deputy governer of Bangladesh Bank, has termed the measure illegal.
Another issue that also needs serious consideration is the threshold of tax exemption for individual tax payers. The limit is upto Tk 0.25 million, as was in practice earlier. That is to say, an individual earning little over Tk 20,000 a month is taxable.The point is: does this in any way indicate solvency (or even near-solvency) of a person to be able to pay income tax? Now, which income bracket can we place him/her in? Can he/she be placed in midddle income group, even by our nominal standard? No way. In India, the threshold is Rs 0.35 million, approximately Tk 0.45 million. Over the past few years, there were demands from various quarters to raise the threshold, but the government didn't seem convinced of the rationale.
Commoners are not interested in the economic implications of budget in a macro economic context. All they are concerned about is whether they're worse off or not than they were in the past year. The budget makers are supposed to feel the collective pulse of the citizens.