The National Board of Revenue (NBR) will surely assess the impact of the changes made to the original fiscal proposals made in the Finance Bill-2015 before its adoption by the Jatiya Sangsad (national parliament) Monday last.
Every year the revenue board engages itself in a similar kind of exercise. So, this has become more of a routine job for it.
However, the impact of the amendments made to the original fiscal proposals by Finance Minister AMA Muhith, after being requested by the Prime Minister, would be somewhat different in the context of the tax revenue target set for the fiscal year (FY), 2015-16, commencing from today (July 01).
The finance minister himself in his budget speech, delivered on June 04 last, termed the tax revenue collection target that represents more than 30 per cent growth in such earnings over those of the just concluded fiscal, 'ambitious'.
The amendments made to the Finance Bill-2015 before its adoption would mean a reduced collection of tax revenue than what was estimated, on the basis of hikes proposed in the original bill. Thus, the tax revenue collection target has now become even more ambitious and unattainable.
It is understood that the finance minister did not make the amendments willingly for he knows the negative effect of the same on the targeted level of revenue collection and the implementation of the nearly Taka three trillion budget for the current fiscal.
Some changes will provide genuine relief to the middle-class taxpayers and businesses. But he had to make a few amendments coming under pressure from circles concerned.
Muhith, however, did vent his frustration in the House over the developments surrounding the fiscal proposals saying, "There has been some intense lobbying and I have backtracked, falling a victim to such lobbying".
The apparel exporters are the ones who mounted tremendous pressure on the finance minister to skip the proposal on hiking the at-source tax from 0.30 per cent to 1.0 per cent on apparel export. The finance minister has chosen a middle ground and fixed the tax rate at 0.60 per cent for all exports, including the apparels.
The private universities and medical and engineering colleges also were successful in reducing at least one-fourth of the proposed hike in value added tax (VAT). These institutions used to enjoy full exemption from payment of VAT previously.
The fledgling e-commerce service-providers could also stave off the payment of VAT as was proposed in the original finance bill.
But the 2.50 per cent cut in the proposed corporate tax in the case of new banks, financial institutions and insurance companies that got permission in 2013 came as a surprise to many.
None has heard these entities making any demand publicly for a cut in their tax rate. Yet they are fortunate to have a corporate tax rate, equivalent to that of the publicly traded banks, insurance companies and other financial institutions.
The other non-listed banks, financial institutions and insurers will have reasons to feel discriminated against, for no fault of theirs. For being new in the business, they were not entitled to this kind of tax benefit in the past.
Undeniably, the collection of the targeted amount of revenue remains the sine qua non for full implementation of the budget that would again help achieve the GDP (gross domestic product) growth target of 7.0 per cent set for 2015-16.
If one looks back to the just concluded fiscal year, one has sufficient ground to be sceptic about achieving both revenue and GDP growth targets in 2015-16.
But the finance minister appears to be very much optimistic about reaching both the targets. On tax revenue collection he is largely banking on the expanded capacity of the tax administration in recent years.
And as far as 'political stability', which is considered one of the most vital elements in terms of achieving higher economic growth, is concerned, Muhith is hopeful about the continuation of the ongoing peaceful political situation. He pins much hope on the prevalence of 'good sense' among the relevant parties (political).
One has to wait and see how the elements, on which the finance minister has decided to bank on heavily for achieving the projected economic growth, work in the coming days.
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