Noted economist Dr Binayak Sen on Saturday recommended bringing wealthy people, who earn 45 per cent of the urban income, under tax net to relieve the middle- and lower-income group from the tax burden.
"Bring them into direct income tax and you do not need to increase tax rates," said the Director General of Bangladesh Institute of Development Studies (BIDS), a public sector research organisation.
"If the National Board of Revenue (NBR) can bring them into the tax net, it does not also need to extend its net to middle-and lower-income group to burden them with tax," he told a post-budget discussion titled "National Budget for 2024-2025 and the Medium-Term Outlook on the Bangladesh Economy".
The BIDS organised its first-ever post-budget discussion at its office in the city.
Dr Sen put forward the suggestion based on the findings of Household Income and Expenditure Survey 2022 (HIES 2022), saying that 45 per cent of urban income concentrated in 10 per cent or 13 million urban households where approximately 20 million people are eligible to pay tax.
He stressed the need for reform in the National Board of Revenue (NBR) as part of 'key institutional reforms' to accelerate revenue mobilisation and meet the budgetary expenditure.
In his opening remarks, Dr. Sen said the success of the budget depends on favourable external circumstances and some key institutional reforms, including reforms in the financial sector.
About the undisclosed income, he questioned the 15 per cent flat rate for legalising money and said there should always be a scope for whitening money during tax return while the tax rate should depend on respective circumstances - the amount of money, source of income etc. - instead of offering a flat rate.
He said the flat 15 per cent tax for whitening undisclosed income went against the tax-equity spirit.
Dr Sen said legitimate income of the citizen can also be undisclosed income due to various reasons. "In this case, the income needs to be given an opportunity to be shown."
He also suggested coordinated policy actions like forming a banking commission or committee for the reform of the financial sector.
"We must take a proactive strategy for financial sector reform," he said, adding that the central bank should not allow rescheduling non-performing loans for four times which was twice earlier.
"Each rescheduling allows loan defaulters for three years, and four rescheduling 12 years, during which an entire government, policy or strategy may change," he noted.
He said that the proposed budget is embedded in a conscious framework of policy-coordinated actions across five dimensions - a move towards flexible exchange rate regime, removal of interest control, fiscal realism, enhancing supply response by boosting production, and preparing the country for out-of-LDC context. The budget reflects realism but it would need time for adjustment, he added.
Speaking on macroeconomic issues, BIDS Research Director Dr Monzur Hossain the size and approach of this year's proposed budget appear to be rightly designed considering the current macroeconomic instability and economic downturn.
Without proper and prudent reforms, a higher level of tax-GDP ratio (say 15 per cent) may not be achieved in the next five years, he said.
"A desperate effort for tax collection is visible which might be counterproductive in the medium- to long-term," he added.
He suggested giving more emphasis on financial resource mapping, efficient allocation of resources and different agencies' expenditure-absorption capacities to achieve quality investments.
Speaking on industry and trade, BIDS Research Director Dr. Kazi Iqbal said when an industry emerges and is able to draw the attention of the government, the government helps them grow.
"Good, but not good enough," he said, adding that the government should have a plan on industries that would take the lead in industrialisation and support pro-actively.
He said the role of the national budget has been more of "reactive" than "pro-active" in promoting industrialisation. However, he said the national budget should reflect such aspiration where it can identify a few of strategic sectors.
"Chalk out a plan on how these industries will be supported and offer a comprehensive "industrial development package" for the next 5-10 years that would also include fiscal and monetary incentives," he said.
Speaking on agriculture and rural development, BIDS Research Director Dr. Mohammad Yunus said the agricultural policies framed with broader objectives of the Five-Year Plans have been the main drivers of the growth of this sector.
He said that the policy initiatives are manifested through agricultural research, innovation, and technology dissemination by both public and private sectors.
The major policy thrusts that influenced the growth of the crop sub-sectors are spread of irrigation technology, rice breeding, agricultural mechanisation, and subsidy for input distribution, he said.
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