Published : Tuesday, 18 June, 2019 at 12:00 AM
The government has placed an ambitious BDT5.23 trillion budget for the fiscal year 2019-20 in the parliament on June 13, 2019. The figure is an increase of an 18 per cent from the revised budget of the outgoing fiscal year. It was a budget presented by the new Finance Minister AHM Mustafa Kamal with commitments of dynamism and understandability. Unfortunately, due to illness, he could not present the whole budget and the Prime Minister Sheikh Hasina had to step in to present the complete budget in front of the people.
The budget is not only an ambitious one but also reflects a lot of promises. On the negative side, it lacks clarity in certain areas. From people’s perspective, the implementation of the budget is the key and the government’s policies and strategies are going to define if it will be a successful budget planning or not. Hence, now all depends on the government to utilize thing budget planning to take Bangladesh forward while comforting the citizens.
To understand the budget for FY2019-20, few points are noteworthy. It is a BDT5.23 trillion budget with 8.2 per cent GDP growth target, highly ambitious even a few years back but not impossible in the current context of Bangladesh. The budget aims to generate fresh employment for 30 million people by 2030 while ensuring pension scheme for all. It also targets to increase number of taxpayers to 10 million from 2.2 million. Inflation is a critical economic problem of Bangladesh and this budget promises to contain inflation at 5.5 per cent.
This budget creates a provision of no fee for companies having capital of less than Tk 50,000. Highest 5 per cent cash incentive is allowed for RMG sector in the budget. 2 per cent incentive in remittance was introduced. For wealth over BDT500 million, 0.1 per cent surcharge has been introduced. To improve the condition of capital market, 15 per cent tax on stock dividend was initiated and the same is applicable on retained earnings of the listed companies while tax-free dividend ceiling was raised to BDT50,000. Most importantly, the provision of turning black money into white was brought back as in the fiscal year (FY) of 2019-20, black money holders will be able to invest in economic zones and high-tech parks by paying a flat 10 per cent tax and for that the tax authority will not go for the source of the money. They will also be able to invest in real estates.
While commenting on the budget from different perspectives, few facts regarding the current Bangladeshi economy cannot be forgotten. Income inequality between the rich and the poor has been widening significantly in recent years holding adverse effect on the concept of poverty reduction and accelerating growth. The government forecasts economic growth at 8.2 per cent in the new fiscal year. The growth forecast is depending on public spending. This may bring the risks of the middle-income trap and jobless growth. The country is now facing economic stress, which unfortunately according to experts was not reflected in the budget though it opens the doors to many opportunities.
Converting black money into white is one of the most important traits of this budget. We have to accept the fact that corruption has spread its black claws in all areas and aspects of Bangladesh. it is critically hurting our lives as well as the economy. Problems like money laundering and terrorism financing is becoming more prominent in the current context and regretfully the corruption cannot be fully eliminated from our system even with full efforts in the near future. This corruption is actually generating black money and usually the money flows into foreign economies as the corrupt ones cannot risk exposure to the laws of the land. But when it enters the foreign economy, it does not help us in any ways. This new provision of converting black money into white will reduce or eliminate this loss and will even help us attain our economic goals. But for that, it is important that the black money is converted into white in a large scale which is not evident in the history of Bangladesh.
From 1975 onwards, almost all the governments had given the opportunity to convert black money into white. But that plan did not succeed much as only around BDT14,000 crore was covered under such conversion from 1975 till now while it is estimated that BDT 70,000 to BDT80,000 crore is being laundered every year in Bangladesh, let alone the full figure of the black money. During the caretaker government regime in 2007 and 2008, highest amount of conversion of black money into white took place. From 32,558 persons and institutions, BDT9,683 crore was converted from black to white. After independence till today, different governments created such provisions for 16 times but failed to generate impactful results.
This failure in large scale conversion of black money into white is due to some reasons which is going to incur this time also if the government does not initiate and adopt some strategies. First of all, the black money holders lack trust on the government and the authority. They do not find safety and security in exposing their black money. It is due to previous incidents when one availing this opportunity at a certain stage was caught later by a different government. Moreover, if you declare your earnings as black money, then there is a risk of attaining watchdogs over your future earnings. So, they feel, silently enjoying the illegal assets is a better option.
This time, the scheme might also fail due to no pressure on the black money holders. The provision only provides the opportunity but impose no pressure and it will not create any urge among those who holds millions of taka as black money. To create this urge, the government should adopt few policies and strategies to induce substantial pressure on these black money holders. The authority should identify few people with black money to bring them in a mobile court like judicial system. They should not be punished rather they have to pay the reduced tax on their black money to get released from the court.
Many is criticizing the provision of converting black money into white as it is providing corrupt ones higher tax facility than the innocent taxpayers and that is completely true. But the point is, it is not about who is getting benefitted. Due to our system being completely corrupt, we cannot bring the corrupt ones under justice. They are happy with their money stored in the banks of foreign countries resting safely. It is actually the question of country’s progress and if we can utilize this black money for some good. Now, we are getting nothing of it but may be with the provision, we will get hold of some of it. Hence, proper implementation of this provision is highly important.
Now-a-days, the people have no trust on the banking sector due to different scams and continuous rumors of banks being out of money. But in reality the situation is not so fierce. Banks are mostly publicly listed companies and they should cut their costs by lowering expense like luxurious recruitment of the top management and expenditure behind their comfort. The management of the banks are liable to the people and they should not cut down the dividends for ensuring luxury of the employees without the consent of the owners.
To regain the trust of the people, the banks should declare lucrative dividends to the stockholders as that will provide a message that the banks are doing great business and people’s trust will return and they will feel more comfortable to store their savings in the banks again. The insurance companies and financial institutions should adopt the same policies to actually improve their own scenario as well as that of the capital market. Hence, the utilization of the promises of the budget will remain vital.
The government is focusing on VAT as it is evident from the budget. But they should associate it with the social security of the citizens. A portion of the VAT paid by an individual citizen should return to the citizen after his death or if becomes disable or after retirement as pension. For that, a VAT app needs to be introduced which will continuously inform the citizens of how much VAT they have paid and they will be very interested to get that information as it will be their savings for their old age or difficult times. This will increase government’s revenue earning to a great extent.
There are many areas of the budget which can create panic among the people as it will portray higher expenses like; rise in electricity bill, price of commodities, car registration and fitness certificate fees and many things else. Moreover, the tax-free income slab still remains the same. Considering the real inflation in the market, people’s income, except for that of the government employees, has not increased but expenditure on products and services and also taxes is sharply going up.
But after all that, the budget remains development-oriented and if implemented, Bangladesh will move further. Hence, we all remain hopeful as now everything depends on the government and we will wait to see strategies to implement this budget in the upcoming months.
The writer is Chief Editor at Mohammadi News Agency (MNA), Editor at Kishore Bangla and Vice-Chairman, Democracy Research Center (DRC)