Undaunted by possible challenges, both domestic and foreign, the government Thursday placed in parliament an ambitious Tk.5.23 trillion budget for the fiscal year (FY) 2019-20.
The proposed budget is unlikely to create much wave barring the issues such as opportunity offered for legalizing the undisclosed income through investment in economic zones and hi-tech park and purchase of flats and apartments.
The levying of value added tax on edible oils and hike in specific duty on sugar may not also go down well with general consumers.
Also, there is nothing in the proposed budget to cheer by both individual and corporate taxpayers as their tax rates have remained unchanged.
However, the budget has tried to tax the wealthy people more by raising the rate of surcharge on the amount of net wealth. One cannot be hopeful about the actual outcome of this particular tax measure as receipts from this head have been negligible.
Though the finance minister has made known the government's desire to do away with tax exemptions culture, in the proposed budget, he justifiably extended tax holiday facility to some industries including agriculture machinery, furniture manufacturing, home appliance and mobile handset manufacturers, toy, leather and leather goods, LED television and plastic recycling.
The ambiance that is usually witnessed during the budget presentation in parliament was affected slightly because of the sickness of Finance Minister AHM Mustafa Kamal. In fact, he was unable to deliver his budget speech properly and was rather aided repeatedly by Begum Matia Chowdhury who was sitting next to him. However, the situation became normal when Prime Minister Sheikh Hasina read out the key features of the budget on behalf of the finance minister.
One of the notable aspects of the new budget will be the enforcement of new VAT and Supplementary Duty Act and the response it is likely to get from the businesses and International Monetary Fund (IMF).
Proposals, the finance minister in his budget speech said, are being placed to amend the new VAT law that was adopted in 2012. The amendments, obviously, would accommodate the demands put forward by the businesses. The government was supposed to enforce the law two years back, but opposition from the businesses forced it to put the law on hold.
Turning to the most discussed financial sector, Mr. Kamal listed a number of reforms including amendments to the Bank Company Act and promised to hold discussions with all concerned on the possible formation of a Banking Commission. There was not any mention of the issue of bulging classified loans and its effect on the economy in the budget speech.
However, the government has proposed a few measures to buoy up an otherwise moribund stock market. To discourage the listed companies from declaring stock dividends and retaining their profits in the form of reserves, a 15 per cent tax on both has been proposed. The amount of tax-free dividend income has also been doubled though. However, these measures being partial or piecemeal and not relevant to inherent problems are unlikely to make any lasting impact on the market.
The proposed budget appears quite accommodative as far as the interests of the small and medium enterprises and traders are concerned. The finance minister has proposed to exempt the small marginal traders having an annual turnover of Tk.5.0 million or less from payment of VAT. The turnover limit has also been raised by Tk.1.4 million for SMEs with regard to income tax payment.
The finance minister, in the proposed budget, sets an operating expenditure target at Tk. 3.1 trillion and that of development expenditure at Tk.2.11 trillion.
He has projected the total revenue earning at Tk. 3.81 trillion. Of the amount, the NBR is to mobilize Tk. 3.25 trillion.
The government has, apparently, exercised restraint this time as far as fixing the NBR tax revenue target is concerned. The growth in NBR tax revenue has been projected at 18 per cent higher than the revised receipt of the outgoing fiscal. In the budget for the outgoing fiscal, the original revenue receipt target represented nearly 44 per cent growth over the revised target of the previous FY.
The expenditure pattern in the proposed budget for FY 2019-20 has remained almost unchanged. In the operating part of the budget, 28 per cent of resources are meant for meeting expenses relating to pay and allowances and pension payments and 18.3 per cent for interest payments. 14.1 per cent of resources will be spent on subsidies.
The government estimates the budget deficit at Tk. Tk.1.45 trillion, which is 5.0 per cent of the GDP. In financing deficit, Tk.680 billion will come from external sources and Tk. 773.63 billion from domestic sources. The government intends to borrow Tk. 473.64 billion from the domestic banking system and Tk. 300 billion through the sales of the savings certificates and other non-banking sources.
The public administration will eat up 18.5 per cent of the overall budgetary resources, followed by education and technology (15.2 per cent), transport and communication (12.4 per cent) and interest payments (10.9 per cent).
However, there is scepticism about the government's capacity in relation to mobilization of projected resources and spending the same. Critics do refer to inevitable shortfall in budget implementation that the government admits at the end of every FY. The call for setting 'realistic' budgetary goals is becoming louder.
But the incumbent finance minister is confident of taking the tax revenue collection to the optimum level by removing mismanagement, corruption and misuse in tax revenue administration.
