Finance Minister AMA Muhith Thursday placed the Tk.2.5 trillion national budget for the next fiscal (2014-15) setting the country's economic growth target at 7.3 per cent for the year.
The finance minister fixed the higher growth target with the expectation that factors that usually influence the pace of the economic growth of the country would be favourable during the year.
Mr. Muhith expressed the hope that investment, export and remittance would get a boost next fiscal because of possible acceleration of the pace of growth of the global economy. He also expected the weather to remain favourable and the political situation stable in the FY'15.
He also promised to continue with the current strategies involving monetary and fiscal policies to ensure 'macroeconomic stability' in the upcoming fiscal.
The finance minister in his budget speech assured the JS of taking necessary initiatives to develop infrastructures, skills and human resources continuing with fiscal, monetary and capital market reforms.
The budget for the next fiscal and recent ones being out of the same mould have maintained the trend of greater reliance on direct taxes because of the continued erosion in the import duty revenue.
The finance minister in the budget speech referred to areas where there would be hike and reduction of tax and duty rates. But he did not adequately explain as to how he would manage such a large amount of revenue in a not-so-healthy business environment.
For the governments, past and present, it has been a usual practice to include a few 'pro-poor rhetoric' in their budgets. But such rhetoric has never been accompanied by 'tap- the-rich' approach. Muhith while banking more on direct tax for resources has levied 'rich tax' for the first time. The people having annual income more than Tk. 4.42 million would have to pay 30 per cent tax on their 'balance' income.
However, belying widespread expectation the finance minister has kept the tax exemption threshold for general taxpayers unchanged. But the same in the case of women and senior citizens of 65 years of age and above, physically challenged persons and war-wounded 'gazetted' freedom fighters has been proposed to be enhanced.
Despite demand from the businesses to reduce the corporate tax of both listed and non-listed companies, the finance minister has proposed to reduce the corporate tax by only 2.5 per cent for the non-publicly traded companies.
However, the government has decided to allow tax exemptions in some selected cases and continuation of tax holiday facility to industries in a few specific categories and areas with the objective of boosting an otherwise sagging investment environment now prevailing in the country.
The Tk.2.5 trillion-budget for the next fiscal includes a non-development expenditure of Tk. 1.28 trillion and development expenditure of Tk. 863.45 billion. However, a big part of the non-development expenditure, more than Tk.310 billion or 18.4 per cent, will be spent on servicing debts, local and foreign. In fact the amount is equivalent to what the government intends to borrow from the country's banking system to meet the budgetary deficit in the upcoming fiscal. Then again nearly 10 per cent of the non-development expenditure would be spent on account of 'subsidies and incentives' in FY'15.
The finance minister in the proposed budget intends to mop up NBR-tax revenue worth about Tk. 1.5 trillion against the revised target of Tk.1.25 trillion for the outgoing fiscal. Until March last, the NBR mobilized Tk.985.31 billion in various taxes. Though income from VAT (value added tax) was less than the targeted one, the government wishes to mobilize a greater volume of resources from this particular source alongside a large income from the taxes on income and profit.
The changes in supplementary duty at the import stage and VAT, if effected finally, might help reduce the price of many essential items.
The government for the first time in many years in the original budget has estimated the budget deficit at 5.0 per cent of the GDP or Tk. 675.52 billion for the fiscal 15, which is equivalent to the revised target of the outgoing fiscal. In the fiscal 2008 the deficit had reached 5.4 per cent. But that was far beyond the original target.
The government intends to meet the deficit with foreign financing worth Tk. 242.75 billion and domestic financing worth Tk. 432.77 billion. The domestic financing includes bank borrowing to the tune of Tk. 312.21 billion.
The allocation of resources of the budget for the fiscal 2014-15 to various sectors was very much in line with the previous budgets barring the one sector--- the communication infrastructure that includes the bridge division. The division, which is now implementing the Padma Bridge, got a large allocation, equivalent to 3.49 per cent of the total budget expenditures.
The government, which has been consistently making projection about the inflation rate remaining within 7.0 per cent in recent years, has again made identical projection for the next fiscal. Mr. Muhith expressed the hope that inflation which was 7.4 per cent in April last would come down to 7.0 per cent in June next and decline further at the end of next fiscal.
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