A case for minimum wages and universal tax

| Updated: June 22, 2022 21:40:09

Day labourers need liveable minimum wage. 	—FE Photo Day labourers need liveable minimum wage. —FE Photo

Bangladesh, a country aspiring to middle income status, cannot ignore the basics of taxation, wages, price controls and relevant other fiscal measures that come with such aspirations. Incremental thinking must give way to organised radicalisation, laws must be reformed and over-reaching leeway to businesses has to be reined in. Development expenditure cannot be stopped. In times of world economic turmoil, they have to be chosen carefully and slowed down, where necessary.

As it is every year there's a scramble towards the last months to abort projects that never took off and another rush to hand back in budgeted cash that was not going to be spent. Each year the National Board of Revenue (NBR) outdoes itself by increasing collection beyond its own optimistic forecasts though rarely meeting targets set for them. Finance ministers have this penchant of pounding tables with numbers that even nervous parliamentarians have difficulty in defending. From the NBR perspective, minus the graft and political hurdles towards hitting softer targets, they shrug their shoulders and soldier on choosing the low hanging fruit to dump more taxes on. Tax evasion and avoidance has become such common place so as not to be considered factors anymore. The success in forcing tax on tax down everyone's throats including rewriting the concept of value added tax (VAT) has raked in dividends from the wider populace including those supposed to and yet not paying income tax. It shouldn't be so at all. Prior to the pandemic and even now, day labourers and rickshaw pullers annual earnings are over the threshold of the minimum of Tk 300,000 income tax ceiling. Those students doing private tuition fall in similar categories. There are many instances of day-labourer families' combined earnings going up to Tk 50,000 per month. Tracing them is an issue. Most don't have bank accounts and dealings areal ways in cash. Try taxing those that rent out slum dwellings or messes. Following up all public advertisements on tide sun-letting accommodation or private hostels. Think of all tonsure go downs that are rented out, kitchen market shop owners, barring those in established built up ones, are as difficult to trace.

SME product sellers display their wares on kerbs with nothing by way of trade licences let alone traceable addresses or bank accounts. Mobile Financial Services (MFS) provide an opportunity governments fear to intervene in. The outrage there won't be as silent as in the case of the overzealous, punitive taxation on bank interests, bond interests and even deposits that have now been hiked further, a classic example of tax on tax. For now, the stress has been on getting more transactions conducted through banking channels with the 'source of income' column being a tracker of sorts. The list goes on.

The hard truth is that regionally and in rural areas there are veritable and established business dealings that should be taxed. In the absence of coordinated buying, storage and transportation of agricultural goods it's a 'fools step in where angels fear to tread' situation. The age old issue of farmers not getting proper, profitable prices for their goods and the middle-man and millers scooping up profits at little or no investment is so politically sensitive that officers look the other way.

The government has effectively, however reluctantly, surrendered to these market forces including the graft costs along the transportation route. There's a further surrender to the exploitative rent-seeking at markets where hawkers take turns and pay for fixed hours of doing business. There too, government has had to give way to. Genuine business organisations and associations in markets are as helpless. The surrender is to those connected with grass-root politics that explains how affiliated bodies to major political parties, weighted heavily to the ruling one maintain their colleagues that apparently have no source of income and yet can organise motorcycles escorts to leaders. The other area of surrender is to big business, many of which are expected to cough up significant amounts at times of elections national or regional. There can be few countries where police vehicles can be found sporting sponsorship messages from businesses. Fewer countries will have private transport displaying signage ranging from press through lawyers to 'on emergency this-and-that duty'. These serve two distinct purposes. Prevention against being requisitioned for police duty  and exemption of fines for wrong parking, especially when ferrying children to coaching centres or the missus in her shopping ventures.

In an attempt to clamp down on businesses that report zero profits indeed losses, the government had tried the flat tax whereby based on where a shop was situated a minimum tax was proposed. That didn't go down well either by the businesses or in Parliament. But if reforms are to be made there really is no alternative to minimum taxation. The third surrender has been to big business as has been watched with disgust. Added to the exemption enjoyed by millers merrily raising rice prices through clear hoarding and importers through similar unsavoury activities with essential products another group has jumped on the bandwagon. Established businesses supposedly eschewing corporate reputation and all such finer, applauded matters, were in full sight playing with the market with edible oil and now rice. Incredibly enough, traders were fined absurdly small amounts compared to the quantities discovered to have been hoarded. It made the right headlines but did little to bring prices down as only a handful were penalised. It was about setting examples. An arrest warrant for one major industrial Group Director and owner is being watched and followed carefully even though not making major press headlines.

What is being lost in the midst of such manipulation and omissions is that the cost of living has cornered the fixed-income group, especially the small 3.3 million odd of the population that pay income tax. How often have we been told our tax-GDP ratio is abysmal, even on South Asia. Pay scales have not risen anywhere near in tandem with public employees. Barring multinationals, businesses have struggled between battling through the pandemic, meeting rising fuel and energy costs and having hidden tax increases piled on them. The answer is the same one 'increases'. On the contrary during last year even banks were forced to cut pay by as much as 30% in some cases. There was little staff could do given they had no organised platforms. This pushes the argument for minimum wages periodically adjusted to cater for inflationary increases. The real cost of living expenses must now be segregated from national to regional basis so as to allow people to survive with families. Rapid increases in electricity, water and gas prices, piped or in cylinders, have to be met from the same family budget. Anything short beckons corruption with guess who being the beneficiary? Such periodic raises spares the disturbances, disruption to business and protests of workforce with their backs to the walls demanding pay hikes.

The final area of surrender has two aspects to it. Corruption in the public sector, being unearthed on an almost daily basis from official to school teacher, drivers and more has had an added feather to it. Massive flight of capital that the government openly admits it has no mechanism to stop. That's where laws heavily penalising in jail terms and asset seizing and bilateral government agreements must be speedily put in place. The latest measure proposed in the budget is to incentivise return of such moneys through a simple 7per cent tax and no questions asked. That and the continuation of whitening black money with 10 per cent tax are unlikely to generate anything substantial.

The latter was allowed in purchase of real estate and generated Tk 20 billion not all of which went to real estate investment. The moneys invested in the share market has vanished courtesy of a continued decline minus the few occasions when manipulators raised prices artificially. Those that transported money illegally didn't do so to return any of it. The amounts have been staggering. Courts have asked for lists of individuals identified for such misdemeanours. Even if such lists are provided, they can be so done with smooth caveats. What that does to boost confidence in honest tax payers is not important anymore. Small matter that they will be ones filling tax exchequers in the future.


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