The FM has a daunting task on his hands
US President Joe Biden wants to raise taxes on the rich. He also wants to spend $80 billion on the National Revenue Service to weed out tax evasion. These are the additional resources that will go towards funding part of the $1.9 trillion stimulus package that he wrested approval for, from Congress and the Senate.
Our finance minister has a bigger task on hand. In a couple of months, he will have to present a budget that can support further stimulus, spending on health, and a whole host of other expenses that the government has been saddled with. It doesn’t make it any easier, what with the National Board of Revenue falling some Tk50,000 crore short of its target till end-March.
In any given year, NBR doesn’t achieve the targets set for it because ambitions and reality hardly ever match.
This in spite of nearly Tk10,000 crore black money invested in the real estate sector. With businesses taking an apparent nose-dive, income tax registrations at a pittance and imports on a heavy decline would seem insurmountable.
He has provided one indication: It will be a poor-friendly budget. Traditionally, all budgets have this label. The exception this time is that the additional “business friendly” words have been left out.
Not a year goes by that the business sector doesn’t ask for tax reductions, exemptions, and reforms. There is also controversy of the rule that suggests minimum income tax payments no matter whether there is profit or loss.
This may be true for the bigger businesses with hardly any going out of business.
The complicated math over loan interest, costs, new investment, allowable expenses, and raw material costs is an ongoing battle, coming as it does, associated with the same factors for the rest of the supply chain. This is an area where economists and businesses can better inform from realistic examples.
One thing seems inevitable. Taxes for the richer segment will go up. There may be adjustments in the income bracket-wise ceilings of taxation.
Last year, many were aghast at the percentages being higher on lower income groups and lower on the high income ones. The argument is clear on this. The middle and lower middle-class shouldn’t be punitively taxed.
Neither should those with year on year tax submissions. There are some easy, obvious targets. Smoking products, especially cigarettes, mobile calls, and value added services, taxes on bank deposits are easy targets. So too, are the imported luxury goods, especially high-end cars.
While the economy has stuttered, one hopes he will have taken into account sectors that have more than flourished.
Pharmaceuticals, hospitals, clinics, and testing labs have enjoyed a form of fiendish delight when it comes to the tills, even as people gasped to death.
Rice millers and other wholesalers that artificially raised prices need to be taught a lesson, what with no punitive action being taken.
The appropriations budget will be a matter of great interest. The massive stimulus packages, the bill for interest in these, savings certificates, and the balance with extra funds received from international organizations for Covid purposes will be numbers to come up for scrutiny.
Austerity, including pay cuts in the private sector, especially banks, hasn’t been forcefully propagated or pushed by the government.
That alone will rein in huge spending. The Annual Development that is currently falling on its face, must be monitored. If we have done without projects, maybe they aren’t that much of a priority.
It’s a pointless and regular exercise for ADP targets to be revised downwards every year. With an estimated 25 million of the population having gone to poverty levels, they require support as do day labourers and small traders.
Probably the most perplexing area will be that of consumption. That has to increase if the economy is to be kick-started. It won’t if disposable income becomes hard to come by.
Multiple taxes paid by those submitting returns have to be taken into account. This is borne out by the large numbers that are encasing government bonds ahead of maturity.
Major withdrawals will force higher loans from banks and major injections of money by buying off foreign currency, leading to further debt.
There are those that will caution against too much debt. In times such as these, aspirational figures should be ignored. Dependence on remittances and garments exports has to be reduced.
Raising quality standards of locally manufactured goods to discourage imports, and well-researched gauging of overseas requirements of goods have to be encouraged and rewarded. If money can be spent to check tax evasion by businesses, and thereby the individuals elsewhere, it’s a no-brainer that money should be spent in Bangladesh.
Perhaps the greatest focus should be on the money that has been siphoned out of the country. The former MP Shiplu has had both his jail sentence extended and fines increased. A speedy tribunal to settle outstanding revenue cases is no longer a nicety; its inherent.
Mahmudur Rahman is a writer, columnist, broadcaster, and communications specialist.