Funding the divide

There is a similarity of sorts between what's happening in Japan and Bangladesh as far as the stock-market is concerned. The Japanese have pumped in close to $ 70 billion to ensure the Nikkei does not collapse in the uncertain aftermath of the earthquake and tsunami. Investors there would be pressing the 'sell' button in simple consideration of the massive impact the event would have on otherwise stable, profit generating businesses. In Bangladesh, close on the heels of sinking Tk. 6.0 billion (600 crore) to stabilise the stock market that didn't create a ripple, another Tk. 50 billion (5000 crore) is now being mobilised for a similar purpose. Foreign exchange is being released by the Bangladesh Bank to enable banks to settle import letters of credits (LCs) and banks are complaining about liquidity issues. The similarity ends there. Japan's issue was necessitated by the uncontrollable factor of nature; Bangladesh's uncontrollable greed. No one is saying where the excess liquidity of a few months ago went and how banks managed to manage the LC situation prior to this. Where the huge amount of money that was earlier involved in daily transaction in stock market has now flown into, after the crunch? It still remains an enigma. All such transactions were made through the beneficiary owners' (BO) accounts with the Central Depository Bangladesh Limited (CDBL) and did largely involve the accounts of investors will the banks. Meanwhile, remittances reportedly have reduced not stopped. Even the impact of the great Libyan and Egyptian exodus hasn't reportedly hit that hard as of yet. Exports, as has been detailed so far by a variety of forums have increased over last year. It would appear that the fear expressed at a dialogue session recently is coming true in that the gremlins affecting the share-market are reaching out further. One only hopes the new fund will not be creating fodder for the sharks that have yet not been identified. International price rises in food and fuel has its own pressures on our economy and that has been exacerbated by the higher imports of fuel to create the power from the quickly installed power plants. The government has also decided to buy food grains at higher cost from the global market to boost the buffer stock, especially for the poorer section of society. All of this comes at a price. Of import however is the coffer from where the extra funds are being generated from because that would inevitably mean a hole somewhere else. And reading between the lines it would appear that inevitable new taxation is the only way out. The first indication was in the revelation that the tax and value added tax (VAT) laws are to be changed. The second indicator came from statement by the Federation of the Bangladesh Chambers of Commerce & Industry (FBCCI) urging that tax ceilings and rates be maintained. And finally the strongest indicator came when the Prime Minister spoke out strongly against the general tendency not to pay taxes. The late and former Finance Minister Saifur Rahman had once stated that if all the billionaires in Bangladesh paid their taxes properly, he wouldn't have to raise taxes. Judged from the balancing-ball act, the National Board of Revenue (NBR) has to play, it would appear that instead of a spread of the tax net, they are looking at imposing further on those they have a firm grip of. The new terminology of narrowing the 'social divide' in terms of earning and income may catch the fancy and meet the approbation of the social activists but it has its pitfalls as well. A major part of growth comes from spending of disposable income that wealth generation creates. Should this be reduced, some of the major thrust sectors of the economy, such as real estate, already under pressure, will face problems of a different kind. Given that most companies in the sector operate on bank loans, there is a spiral impact as well. The cement, glass and brick industries too then come under pressure. The moves taken so far to encourage tax-payers have been few and far-between, otherwise the numbers of tax payers would have gone up. Innovative incentives have to be thought up of that can woo and attract the populace. Tax cases really must be speedily disposed or they tend to be out to hang and dry. Higher tax rates sound appealing; realising them is a different matter. And that brings us back to square one. (The writer is can be reached at mahmudrahman@gmail.com)