As is well-known, the period referred to by the governments worldwide for accounting and budgeting purposes is called fiscal, financial or budget year. It is the accounting year of a government and is used for budgeting, keeping accounts and maintaining taxation records. It varies from country to country and is also used for financial reporting by businesses and other organisations. However, laws in general do not necessarily require the reporting period to be the same as the calendar year (January 1 to December 31). In Bangladesh, the practice has traditionally been to follow the July-June period as fiscal year in line with the practice during Pakistani era. The Indians, on the other hand, have continued with the British colonial tradition of April-March fiscal year that was first introduced way back in 1867. The British did that in order to align the accounting and budgeting practices with that of imperial Britain. Before that, the financial year in the Indian subcontinent used to commence from May 1 and concluded on April 30 of the subsequent calendar year.
But unfortunately, similar to many other instances like the culture of 'Siring' in the civil service, Bangladesh has failed to amend or correct its inherited practices conforming to the realities on the ground. Interestingly, Pakistan is the only other country apart from Bangladesh in the whole of South Asia to stick to the July-June fiscal year. In the USA, the fiscal year starts in October. Many countries like Austria, Brazil, China, Portugal, Russia, South Korea, Spain and Sweden adhere to the January-December financial year. On the other hand, some countries like Afghanistan, Nepal, Ethiopia and Iran determine it on the basis of their indigenous calendars.
Consequently, it would have been a good idea if the fiscal year in Bangladesh was launched from January, which could have reduced many complexities in matters of counting. Alternatively, it could start from April in tune with the Bengali calendar and the climatic cycle. Both these two options would have reflected more accurately the seasonal, climatic and economic cycles in our society.
There are also other justifications for switching over to the January-December or April-March fiscal years. For example, it would have enabled the completion of infrastructural works including those in the communication sector before the start of the rainy season. That would have empowered the contractors to finish their works without any disruptions. Regrettably, it has by now become a bad practice in Bangladesh to start digging roads and building other structures hastily in order to foot bills before the conclusion of fiscal year in June. As a result, the lives of people, especially those in cities and towns, often become almost unbearable. It allegedly opens up a floodgate for resorting to windfall gains through corruption and pilferage at different layers of the government.
It is pertinent to note that the government of neighbouring India has already made a move to switch over to the January-December fiscal year by dispensing with the past colonial tradition. As a stopgap measure, the budget is now being presented in parliament in the first week of February instead of the last week. In fact, the Indian state of Madhya Pradesh has already announced the shifting of its fiscal year to the January-December format with effect from 2018.
Many justifications have been cited for the Indian move. For example, it is expected to align the domestic economy with the prevailing practice in a majority of the developed states. It is also likely to be a progressive and convenient transition for the local economy as it gets increasingly integrated with the global economy. A uniform fiscal year in line with the global practice will also be a relief to innumerable companies and business entities, including multinational ones, as they have to currently deal with two types of financial years. Other arguments put forward for adopting the January-December fiscal year include the need for aligning it with the vital monsoon cycle and crop harvests for both Rabi and Kharif varieties. Besides, experts opine that the current time-frame leads to suboptimal utilsation of working season. Crucially, the current fiscal cycle was chosen without any reference to national culture and traditions as well as convenience of the masses. Clearly, our fiscal year is not aligned with international practices, which impacts collection and dissemination of data from the perspective of national accounts. And most importantly, why the inharmonious fiscal time-frame chosen during the Pakistani era should be continued in independent Bangladesh is itself a big question.
Obviously there will be certain costs for changing the fiscal year to January-December. A change would entail major readjustments by business entities including companies and the National Board of Revenue (NBR) in the form of one-time costs. Some may raise question whether it is worth it. Observers feel that the move could be seen as both good and bad. It would be good as it is the global practice, but not good because of the cost of implementation. Although aligning the fiscal year with global norm and practice will benefit the country's economy through linkages with the global economy and the vital monsoon period, it will also entail significant one-time costs for both the government and the business sector. This is particularly relevant against the backdrop of a new VAT law as well as initiatives for new customs and income tax laws that are likely to be rolled out within the next few years. The transition will certainly be a logically progressive step, but the timing needs to be decided upon by keeping in mind the costs of transition. There is also need for developing robust arrangements and mechanisms that can operate and function in the midst of potential complexities. History tells us that many good initiatives and measures had failed to deliver the anticipated benefits and outcomes due to poor time management.
