Although the FY2021-22 budget favours businesses, its implementation will be the key challenge, thanks to an uncertainty over meeting the revenue realisation target.
It will be tough for the government to achieve the revenue target without modernising the tax collection system through digitisation and simplification.
Economists and analysts said this during a virtual post-budget discussion in the capital on Monday.
They said the hike in tax on mobile financial services (MFSs) would create more pressure on the public and hamper the overall financial inclusion.
The webinar styled 'Bangladesh towards a Resilient Future - Protecting Lives and Livelihoods' was co-hosted by the Policy Research Institute (PRI) and the Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka.
Planning minister MA Mannan addressed the event as the chief guest and chairman of Parliamentary standing committee on finance ministry and former foreign minister Abul Hassan Mahmood Ali as the special guest.
MCCI president barrister Nihad Kabir and PRI chairman Dr Zaidi Sattar jointly moderated the event where member of parliamentary standing committee on public accounts Waseqa Ayesha Khan, commerce secretary Tapan Kanti Ghosh, PRI executive director Dr Ahsan H Mansur, and MCCI vice-president Anis A Khan spoke as guests of honour.
MCCI tariff and taxation subcommittee chairman Adeeb H Khan and PRI research director Dr MA Razzaque presented keynote papers.
From the macroeconomic perspective, Dr Zaidi Sattar said, the FY22 budget is very positive for businesses as well as for the welfare of the general public.
Bangladesh's economy is stable and still growing compared to many other countries even though the pandemic is still hurting life and livelihood, he said.
"Opinion is mixed among local think-tanks on the economy but global researchers consider Bangladesh's pandemic recovery a miracle of development."
The PRI chief said the export-led growth has been a development paradigm since the 1960s and Bangladesh is still on the right track even during the pandemic.
Identifying priorities in the next budget was good for industrialisation while completion of at least five to seven mega projects in next three to five years would help increase GDP growth by 1.0-2.0 per cent, he said.
When economies around the world have been witnessing a very high budget deficit, Bangladesh's deficit of little over 6.0 per cent seems very realistic.
Lower reliance on foreign debt and somewhat stable inflation is also good indicators for the economy, according to the PRI chairman. However, the main challenge would the implementation of the budget as the tax-GDP ratio is still very low at 11 per cent only, he observed.
Besides, higher rate of public borrowing will impact private-sector financing as the government plans to meet 55-per cent deficit from internal sources.
At the same time, the economist opined, high rate of non-performing loans would also become an issue in credit flow to the private sector.
Welcoming protection measures for local manufacturers, he said the government should be careful about too much protection as non-RMG sectors might find it more profitable to do business only for domestic sector instead of finding export markets or going for export diversification.
"Out of 1,600 export products, 250 are RMG-related and 40 per cent of the rest have the enormous export potential," Dr Zaidi Sattar cited.
He suggested that the government remove tariff barriers for the sake of export diversification.
Delivering his speech, Mr M.A Mannan spoke about discussions on data gap on different issues and its quality.
Planning ministry has taken initiative to accumulate more data and quality analysis, he said, adding: "Support from non-government research entities will also be appreciated if they want to support the move."
Expressing scepticism over the idea of 'new poor', he said, "I believe the phenomenon of new poor is temporary as the pandemic-hit people have already been in the recovery process."
The government has been providing cash aid to the destitute under different social safety-net programmes while the prime minister has also been handing home ownership to thousands of landless families.
Dr Ahsan Mansur said the government should reconsider the decision of increased taxes on MFSs as the services have been contributing a lot to the financial inclusion of common people.
Citing that the tax-GDP ratio in FY21 came down to 7.5 per cent, he said the 11-per cent target for FY22 seems quite unrealistic considering the present situation.
Without structural reform of the tax system, Dr Mansur said, it would not be possible to increase the ratio.
He said disbursement of cash and other support to impoverished families were given based on an old database while the reality of the new poor was totally neglected.
It might have a long-term impact on the country's fight against poverty reduction, he said.
Ms Nihad Kabir said support for local industries and multiple measures to generate more jobs would have positive impacts on the national economy.
Terming the FY22 budget a bit different from the previous ones, she said this budget has come out of the traditional approach but its success entirely would depend on the quality of its implementation.
Modernising the tax system could significantly increase collection without raising existing tax ceilings or putting more pressure on the already tax-burdened sectors, Ms Kabir mentioned.
In his concluding remark, MCCI vice-president Mr Khan said insurance protection of businesses, especially the small and micro ones, is much needed for resource mobilisation.
In terms of insurance penetration, he said, Bangladesh is one of the low performing countries compared to its neighbours in the region.