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Budget FY18: Common people put at disadvantage

Asjadul Kibria | Published: June 04, 2017 20:46:56 | Updated: October 18, 2017 04:05:31

Budget FY18: Common people put at disadvantage

National budget is not only the annual financial statement but also a reflection of the economic philosophy of the government. The current philosophy is market maximisation and state minimisation. To put it bluntly, it is the prioritisation of profit and marginalisation of state-sponsored welfare as outlined in the neo-liberal framework.
In fact, over the decades, neo-liberalism has become the guiding principle of the economic decision making in the country. Thus, there is nothing to be surprised that budget for FY18 is another document of neo-liberalism.  
The basic proposition of this creed is that everything is tradable in the market and people have to purchase their required things from the market. But distortion in market mechanism makes it difficult for most of the people to procure their essentials at reasonable prices. Neo-liberalism, however, believes that market distortion can be corrected through invisible hands and so there is no need for intervention by the state. That means minimum regulation with maximum freedom of market forces.
Now, to move in that direction, to implement the agenda of neo-liberalism to be precise, the state has to mobilise resources mainly through aggressive taxation. With an outlay of Tk 4 trillion-plus, finance minister Mr AMA Muhith has exactly taken the path. Some 34 per cent increase in the target of collecting tax revenue worth Tk 2.48 trillion through the National Board of Revenue (NBR) has set the tone of aggressive taxation. Without increasing the threshold of tax-free level of individual income, the finance minister also shows his aggressiveness to bring lower income people under the tax net.    
The overall tax measures indicate that people have to pay more taxes not for the collective welfare of the society but to cater for the demand of rent-seekers in the name of development. 
A clear example is hike of excise duty on bank balance. Finance minister enhances the minimum excise duty to TK 800 from Tk 500 for bank balance of Tk 0.1 million to Tk 1.0 million. The highest amount of excise duty is set at Tk 30,000 for bank balance over Tk 50 million which is now Tk 15,000. Already bank account holders are subject to 10 per cent income tax at source (15 per cent for those who don't have the Tax Identification Number).  15 per cent Value Added Tax (VAT) is already applicable for any banking service. With all these, enhancing excise duty defies logic. According to budget estimate, the government wants to collect Tk 16 billion on account of excise duty in the next fiscal. At the same time, for the recapitalisation of the state-owned commercial banks (SCBs), the finance minister has allocated Tk 20 billion in his budget proposal. That means, he is taxing people's hard earnesd income to facilitate some defaulters. In fact, over the last couple of years, financial condition of the SCBs has deteriorated.  Millions of taka were virtually plundered and volume of classified loans has enhanced.  Instead of recovering the loans, more recapitalisation indicates more such loans.  
Even before the announcement of the budget, the new law on VAT and Supplementary Duty (SD) became the most discussed and debated issue. Designed with the formula of the international financial institutions, the VAT Act is discriminatory and flawed. Proponents of the VAT act are placing series of analysis to show how good the uniform 15 per cent VAT is.  But it is not necessarily the rate, but the proposed method of collection that is going to empower the already powerful tax authority much more.  While the empowerment of tax officials may be justified, the heavy downside is that it may be misused and applied with discrimination. 
Though the finance minister is confident that implementation of new VAT law will not affect prices, there is no mechanism to check price spiral. Some are arguing that unscrupulous businessmen and traders may hike the prices in the name of VAT. In that case, it is the responsibility of the revenue authority to strictly monitor misuse of VAT. The finance minister explicitly declares that 1,033 products and service will enjoy the waiver of VAT and so prices of these will come down. But examination of the list indicates that consumption of most of these products and services is limited. Even some products are almost unknown to many. Thus benefit of VAT waiver remains a riddle.   
Again, many more products and service will be expensive no doubt.  This will fuel inflation and people with fixed income will bear the brunt. Production cost will also increase due to increase and imposition of the Supplementary Duty (SD) on 1,674 products. These include: raw materials and intermediate goods.  These will negatively impact many development works and fuel cost escalation of the already inflated infrastructure projects.
The spending spree on mega projects and other physical infrastructure ignoring the quality aspects for the last few years clearly demonstrate the trend. While cost of most the projects have escalated more than once, completion deadlines are missing one after another. Thus rent-seekers and cronies are comfortably extracting resources in the name of development. 
Keeping the corporate tax rates unchanged, except for the Ready-Made Garment (RMG), also gives a wrong signal. As a good number of lawmakers are owners of big garment factories, they successfully lobbied for their additional benefits. This is a reflection of crony capitalism nurtured under the neo-liberal agenda of the budget.
asjadulk@gmail.com
 

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