There were certain vantage points to budget formulation this time around that not all budget-making exercises in the past enjoyed. Actually, something of a motivational spring-board existed to launch an aspiring national budget from. First, it coincided with the terminal year of the 7th Five-year Plan and the heralding of the 8th Five Year Plan. Such was the richly endowed perspective of stock-taking and forward-looking put together as a grist to the mill of the 48th budget-making process! Add to this the compelling SDG time-line to be adhered to, as the Prime minister in her press conference on Friday indicated. With FY 2018-19 ending on an estimated 8.3 per cent GDP growth rate, the country is set to step up GDP growth rates around 9-10 per cent to meet the raft of sustainable goals by 2030. With the size of the economy growing, 18 per cent increase in the proposed budget over the revised version of the outgoing year, according to one expert, is in line with trend. So aiming high was a necessary approach provided that the budget were not be unrealistically ambitious going beyond the capacity of existing mechanisms to implement it. In fact, looking at the proposed budget and the track-record of implementation shortfalls one feels the need for capacity -- building within the existing institutional framework. Of course there is the adage saying if one targets the mountain crest at least one will hit the tall tree but being caught up in a fiercely competitive time-wrap this may sound like craving for poetic justice.
The second vantage point for the budget was the vision of the election manifesto envisaging a welfare state. All this provided the directional aspects of the budgetary proposals.
However, the third- term incumbency of the AL government and the maiden budget of a new finance minister with no election year constraints raised the hopes that hard decisions would be taken in respect of black money, non-performing or classified loans, tax evasion, capital flight, capital market reform etcetera. Of course, the finance minister has proposed steps to address some of the problem areas with law reforms, creation of administrative cells but these are devoid of any immediacy of prevention, far less cure. In fact insofar as intractable issues go, the prescribed recipes are long-term, so that the finance minister's well-intentioned moves happen to be piecemeal within a yearly cycle. Nevertheless, when the waiver to black money holders take the form of no questions being asked while they invest in economic zones, high tech parks, land, flat and apartments, the fall guys willy-nilly romp on to the hall of honour! The provision for a hundred per cent penalty tax against those undeclared income holders who will skirt the opportunity is predicated on a big 'if', namely if they are detected. What with the relaxed rescheduling of NPLs- currently under stay order from the High Court -- and the undeterred explosion of unearned incomes, there is a precedents galore to roll back with a stern, public spirited demonstration of political will. Although the finance minister has stressed the need for Bankruptcy and Insolvency Laws that at any rate have been long overdue, one wonders whether these instruments will come a cropper -- giving traction to the deeply entrenched default culture!
The RMG sector has received a range fiscal incentives. Apart from 01 per cent export incentive, it will get VAT exemption at 5.0 per cent on WASA water, and duty exemptions on electricity and safety equipments. Benefits from communication infrastructure and avoidance of conflict between VAT and Customs have been stressed. The other pillar of macro-economy, the remittances are sought to be channelled to the banking sector, free from the clutches of Hundi operatives by subsidizing the remitters. A lump grant has been earmarked for the purpose. Significantly, start-up fund of initially Tk 1.0 billion has been set aside for new entrepreneurs. A new enterprise has to wait for three years to be eligible for refinancing; now the time limit will be curtailed. Innovation will be bank rolled with Tk 1.0 million in each case. Having regard for the growing ranks of educated unemployed, the supportive package should come as a boon. Furthermore, the budget speech has focused on the necessity for a synergic interconnection among education, technology, skill development, job creation, research and development (R&D). It is believed that automation will help expand industries and services which in turn will increase employability. Though allocations to education, health, human development and social security have been increased, the raise is meagre in the face of increasing numbers of recipients, real and potential, remaining outside the pale. There comes the question of a critical mass of people keeping out of the tax net. The proposed budget aims to raise the number of taxpayers from the current around 2.0 million to 10 million in a year's time. This calls for simplication of procedures topped up by efficient and corruption-free tax administration. Upazilas will be geared to be a part of a country-wide campaign to sensitize eligible people to pay tax. If this agenda can be fulfilled it will have done wonders in terms of breaking the jinx of internal resource mobilization. Online Vat System sounds good but there should be clear articulation of the principles to be followed in 'applying VAT at different rates instead of the initially proposed single rate.' Otherwise complexity may ensnare it.
One may not venture to think that even baby steps have been taken to develop the capital market, the stock market to be precise. From that stand point, the resolve expressed to turn the bourses into a source of garnering funds by private enterprise across the board for reinvestment is welcome. The critical dependence on the banking system for credits, a substantial part of which becomes toxic, will have to be eschewed. To encourage small investors income up to TK.50,000 will be tax-free. Doing away with double tax is a step forward. The incentives may be fringe-touching in effect; and for a salubrious impact on capital market intrinsic reform is imperative.
