Promises budget FY '23 holds out

As the size of Bangladesh economy is growing, so is the national budget. That's why it is nothing surprising that the finance minister would present a big budget. The annual exercise of budget-making represents the effort on the part of the finance minister to accommodate the demands coming from various groups. It is however a daunting task.

For AHM Mustafa Kamal, the task appears more challenging for various reasons. His debut budget as the finance minister in 2019 was a sad memory for him. He felt unwell during his budget speech in parliament. Prime Minister Sheikh Hasina then took over and delivered the rest of the speech, a rare event in the history of budget presentation in the country. Due to sickness of the finance minister, the PM even held the formal media briefing and answered budget-related questions in the following day. Some said that the finance minister probably could not absorb the mounting pressure in the last minute of budget formulation and presentation due to lack of experience. 

Mustafa Kamal had to formulate his second budget during a period of global turmoil due to outbreak of the Covid-19 pandemic. So, there was little room for him to manoeuvre budgetary tools in a diverse manner, which is possible during normal time. The budget for FY '21 mostly focused on managing the pandemic-induced economic turbulence. The original outlay was Tk 5.68 trillion though the actual spending stood at Tk 4.60 trillion. His core challenge was to support the economic and business activities through fiscal and monetary stimulus as well as extend assistance, financial or otherwise, to low and middle income people during the pandemic. 

One year later, the finance minister's Tk 6.04 trillion original budget for FY '22 (now revised down to Tk 5.94 trillion) has been directed to support the economic recovery as the pandemic started to wane.

Now the finance minister has formulated the budget for FY '23 in the backdrop of another global turmoil created by the Russia-Ukraine war that heightened the increased geo-political tensions. Post-Covid socio-economic unrest is also there on the domestic front along with persistent inflationary pressure. In that sense, this is also a difficult time for him.

Nevertheless, the finance minister has tried to move ahead. He seems to be optimistic about overcoming the current challenges and future crises.  In this connection, he has followed the path of neo-liberalism as like his predecessors. Neo-liberalism approach 'seeks to transfer the control of economic factors from the public sector to the private sector' with 'fiscal austerity, deregulation, free trade, privatisation, and a reduction in government spending.'  Of course, the followers of the neo-liberalism have made many changes in the classic definition which is now blended with other elements including rent-seeking and cronyism in many countries including Bangladesh. A number of his budgetary proposals and measures also reflect this.

Take the example of a number of sops he has offered for the businessmen. Reduction in corporate income tax along with keeping the tax exemption threshold for personal income tax reflects the finance minister's apathy towards the needs of the ordinary citizens. Cutting the corporate tax is necessary to boost private investment no doubt.  At the same time, individuals also need some respite at the time of high inflation. It appears that the finance minister wants to cover the portion of forgone revenue, due to corporate tax cut, by bringing more individual earners under the direct tax net.

It will not be out of place to stress expansion of the direct tax net as the finance minister has to mobilise more resources to finance the increased spending in the coming days. That's why he has set a target of 10 million Tax Identification Number (TIN) holders in the near future.  He also argued that the number of people belonging to the middle class and above is about 40 million in the country although most of them are not paying income tax or direct tax.  Thus, he gave a strong message about expanding direct taxation. The problem is there is little effort in this direction, while, on the other hand, tax authorities put in more effort to squeeze regular taxpayers. 

Again, allowing special tax treatment for undisclosed offshore assets is a disappointing move. Under the provision, if a taxpayer pays certain amount of tax on such asset, he or she will not be questioned or forced by any authority to disclose the source of any asset located abroad. The legal scope is not to bring back illicitly or illegally transferred money back, but to give the illegal transfer validity. There is also little reason to bring back money parked safely in offshore jurisdiction and so there will be no need to be identified by paying penal taxes. It is unlikely to increase substantial amount of revenue at the end of the next fiscal year.

Without elaborating the list, it can be said that no budget is flawless and it is beyond the bounds of possibility to be so. The rational expectation from a budget is to see how it benefits maximum number of people. There are a number of steps in the FY '23 budget to that end, the finance minister claims. And he takes pride in the exemplary development and robust economic growth he believes the country has achieved. Let us see how the budget ultimately helps the majority of the population in the near term.

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