Finance Minister AMA Muhith is set to unveil the budget for the fiscal year (FY), 2014-15, today (Thursday). He is expected to place an outlay of around Tk 2.50 trillion, 16 per cent bigger than the outgoing fiscal's revised budget. The original size of the FY '14 budget was Tk 2.22 trillion.
The finance minister had earlier announced that the national budget for the forthcoming fiscal would provide mechanism and dynamism for promoting growth-fostering investment and reducing income disparity to help bring more people out of poverty.
Three issues -- growth, investment and poverty -- are expected to get priority in the set of new fiscal measures as well as resource allocation pattern as Mr Muhith, at a number of pre-budget discussions, clearly gave emphasis on putting special attention to 'changing economic status of the country from low to middle-income group by 2021'.
Economists, think-tanks and development partners, however, expressed their scepticism over such prospects, while cautioning all concerned about the possibilities of the economy getting into some major problems in the next few years. One of such problems or challenges relates to how to drive forward the country's industrial sector by continuously attracting domestic and foreign investments.
The finance minister is also reportedly inclined towards giving more attention to the ongoing high priority projects to develop infrastructure. In fact, the people want to see the much-needed administrative attention here so that such projects are implemented in right earnest. During the ongoing fiscal year, only a very few high priority infrastructure projects could make any mentionable progress.
According to reports, the finance minister is expected to include a number of incentive packages in his budget speech to stimulate productive investments. He may also propose for reducing tax rebate on investment in some specific sectors by individuals to 10 per cent from 15 per cent, apparently to enhance revenue earnings. At present, the rebate is given to an individual, up to an amount of Tk 0.15 billion or 30 per cent of his or her annual income -- whichever is lower.
Meanwhile, the upcoming budget may provide tax rebates for the industries to be shifted from the capital. The new industries, which are not eligible for tax holiday, would reportedly be given 20 per cent tax rebate for setting up the plants outside Dhaka while the industries, already established in Dhaka, would enjoy 10 per cent tax rebate for relocation.
The finance minister hinted that the new budget would have incentive packages like lower corporate tax to help spur investment in various growth-supporting sectors including those relating to basic infrastructures. Besides, the budget would, in all possibility, provide both policy and financial supports for developing some special economic zones in the country to attract long-term investments.
Meantime, an ambitious target is being set, as the reports suggest, for the National Board of Revenue (NBR), to collect Tk 1.50 trillion revenue in the next FY. Enlargement of different categories of income slabs for the tax-payers, continuation of tax holiday offers, tax incentives for factory relocation outside the capital and lowering of turnover tax rate are likely to be some of the features that the fiancé minister is going to unveil in his budget speech. The rate of corporate income tax may be reduced for the non-listed companies and the rest might remain largely unchanged in the upcoming fiscal year.
The government, as indications suggest, is likely to impose green tax at 1.0 per cent as surcharge, on prices of products produced by companies who mostly pollute environment in different ways while the environment-friendly industries are likely to receive incentive packages.
Interest payments on account of public debt are, however, set to rise in the upcoming fiscal year, as the government has been borrowing more from domestic sources at high rates of interest although $19 billion of low-cost funds from development partners is lying in the pipeline. However, the spending on subsidy, as has been reported by the media, will be cut this year in a bid to keep budget deficit within the International Monetary Fund's (IMF's) limit. Electricity and fuel prices may also be hiked to effect the subsidy cuts.
The rich and the super-rich are expected to be the prime targets for meeting the income tax collection goal. All indications suggest that the budget would introduce a new slab for very high level of annual income earnings by individuals who will have to pay tax at 30 per cent of their taxable income. The revenue board will also take special initiatives to collect more taxes from individuals owning more than one car and one house.
Analysts are of the opinion that targets about economic growth, inflation, infrastructural development, revenue collection and industrial expansion could have been almost or fully achieved, if basic flaws in the economy had been addressed, the existing infrastructural deficit, been met and political differences were resolved. The government, they suggest, should concentrate more on delivery rather than promises about pushing forward the basic development agenda so that the country can attain the middle-income status sooner rather than later.
On its part, the government needs to look into issues of economic governance for improvement of the prevailing situation. It should be serious enough about the much-needed reforms to fulfil its budgetary pledges. 'Deep-rooted flaws' in economic governance, along with political strife between the incumbents and the opposition parties, had, to a great extent, slowed down the pace of economic activities as well as implementation of development projects in the context of budgetary pledges for the outgoing fiscal.
Ambitious budgetary estimates, which are 'more futuristic than realistic,' should, as the economic analysts emphasise, be otherwise avoided in order to help bring in discipline in the country's financial management. The government needs either to go tough or be friendly to untaxed money to make it flow into the formal economy, according to some independent observers. Policymakers need to work out policies to set the basics right for effective economic governance, they have noted. Otherwise, the budgetary pledges to help overcome the problem of infrastructural deficit will remain largely unredeemed.
szkhan@dhaka.net
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