Vat & black money: Crucial factors of upcoming budget

Vat & black money: Crucial factors of upcoming budget

Published : Tuesday, 4 June, 2019 at 12:00 AM

 

Budget is a key factor for the development and progress of a country as a well-planned budget can ensure utilization of finance to attain maximum benefit for the citizens as well as the cuntry. The budget of Bangladesh for the fiscal year 2019-20 will be presented on June 13 and the third and budgetary parliament session is going to start on June 11. There are several critical factors which can influence our budget planning in several ways–some of which are not properly highlighted most of the times. 

We tend to focus on few issues only though few others require similar or even more importance to make our budget planning a more successful one by integrating public welfare. The issue of value added tax (VAT) and black money are such two issues that needs more focus to come up with an effective and efficient budget for Bangladesh.

It was said that, the government targets to have 10 million registered taxpayers by the fiscal year 2022-23. Right now, we are having around 4 million registered taxpayers with e-TINs. But we believe that this number will be much higher as we are not considering the VAT payers as taxpayers. But we should not forget thousands of taka we pay as VAT every year.

We often try to avoid paying VAT. This shows our non-commitment to the tax laws and our lack of trust on the government over the issue of getting something in return. When we go to a restaurant, we often do not want a proper receipt as that will include VAT.

This scenario could have changed totally if the citizens knew that paying VAT today would help them someday. But we all know very well that there is no social security system in our country. We do not receive an unemployment allowance or old age allowance or medical care security. We even do not get the proper respect from the government officials who are run by the tax of the citizens. So, it is very logical that paying any form of taxes is not welcome by the Bangladeshi citizens.

 

Right now, to collect VAT and income tax, we are using a pressure technique. In many ways, we are forcing to increase the number of registered taxpayers. But the current technique is not actually a sustainable process. The taxpayers must be satisfied by paying the tax with the confidence that the paid tax today is well justified in terms of future return. In many countries VAT is related to the social security of the citizens. Hence, the citizens of those countries are willing to pay VAT on the products and services they purchase and consume.

VAT can be represented positively to the citizens by creating a process to use that for state provided benefits for all citizens. It can also be promoted as savings where they can receive pension like benefits after retiring from any sort of jobs. These will form a responsible relationship between the state and the citizens. If the citizens can be communicated properly about the services they will receive by paying VAT, they will also willingly pay VAT. 

We need to develop a process of calculating the VAT paid by individual taxpayers and introducing a social identity card can help a lot in that purpose as it does in developed countries. People will be happier to consume and also to pay tax as it will provide them several benefits in the future and they will treat it as savings. 

From the beginning, we could not utilize VAT as an important earning source for the government and also failed to engage citizens in wilful payment of VAT. But if we can promote the idea of benefits attached with it, then quality of lives will incline, tax expenditure will decline and tax earnings will increase drastically.

 

Even a ‘devil’s advocate’ cannot deny the fact that Bangladesh has moved forward a lot in the last decade with so many courageous development projects initiated by the Bangladesh government along with improvement in several human indexes under the leadership and guidance of Bangladeshi Prime Minister Sheikh Hasina. Bangladesh has become a role model of development throughout the world. Without effective budget allocation through different sectors, this marching forward would have halted. Like previous few years, the next budget is probably going to be an ambitious budget reflecting our highly ambitious attitude which has been the story of Bangladesh’s development over the last decade.

It is justified to allow a large budget with a proper plan of using that which will bring significant benefits for the people even if the deficit is covered through loans from the foreign or domestic entities.  Here the concern is if the budget is opening the doors for further corruption which is biting our nation like a snake. It is alarming that, we have failed to complete any development projects within the projected and allocated budget.

This inefficiency is completely contributed by the huge corruption as well as lack of management skills. If it was possible to cover the total corruption in public works, that would have exceeded the huge budget deficit figure of each year. But our budget needs to accommodate this extra cost which we thought, with some good intent could be completely eliminated.

 

We have become so used to with corrupt practice that it does not ring any bell for. Unfortunately, it is now time to accept that corruption will exist in our country for a long time in the future.

This phenomenon of our economy called corruption is producing and exchanging a lot of money which we term as black money or undisclosed money. The upcoming budget should clearly indicate and incorporate the process of resolving the issue of this undisclosed money. The upcoming fiscal year should realize at least a portion of the total black money which can be very important in increasing our economic capacity.

Every year about BDT 70,000 to BDT80,000 crore is being laundered. We, from general viewpoint, may not realize the deep impact of things like money laundering though it can push us in a very uncomfortable position in global forums. NBR need to significantly contribute in monitoring and checking money laundering to realize a portion of that undisclosed money in the upcoming budget.

To reduce our budget deficit as well as to bring economic enhancement, we must have a plan for making this black money white. If we do not allow this, then this whole money is actually moving out from our economy and is being transferred or moved to foreign economies. That is, the money is sourced in Bangladesh but it gets utilized in some other countries. Hence, we should think about utilizing this undisclosed money inside our economy.

The government should make provision to invest this black money in some designated areas; may be in some large agricultural or development projects which need emergency funding. In few countries, this sort of arrangements was made to eliminate money laundering and was pretty successful. There is no need to go to the donor agencies or to borrow from other countries for large projects if we allow the black money to flow into our economy. Here, we have to even make this money tax-free or tax-levied as it will be invested on some special projects. If a large tax has to be paid, people with such amount of money will rather prefer to take the ‘second home’ offer in some more developed countries. 

We must make some arrangements to utilize this huge black money for the welfare of our own economy. We can help different sectors in different years by creating tax-free provisions for investing black money. It is now time to let go the so-called ‘ego’. If we are used to the ongoing corruptions, we should not hesitate to utilize the black money stored for our own welfare. We hope the upcoming budget will have some such provisions as this can be a remarkable part of an effective budget. 

We hope VAT and converting ‘black money’ to ‘white money’ will receive adequate importance in the upcoming budget. Expectedly, the upcoming budget will push us reach newer heights in the global forums as we put high hope on the new Finance Minister as he already indicated a dynamic budget for 2019-20. Now, all concerned citizens will keep eye on that.

The writer is chief editor at Mohammadi News Agency (MNA), editor at Kishore Bangla and vice-chairman, Democracy Research Center (DRC)

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