FY2014-15 budget: Thrust on proper implementation

The national budget for 2014-15 fiscal year is due to be announced later this week. Debates and discussions are already on as to the size and dimension of the budget, its impact on market prices, subsidy, import protection, implementation strategy and a host of other issues. Widespread doubts have already been expressed regarding the implementation of the budget in view of, among other things, uncertain political climate and deteriorating law and order situation in the country. As a matter of fact, the 2014-15 budget will be presented at a time when our politicians don't see eye to eye with each other, political rivalry is often being translated into abduction and murder, social fabric is being torn apart for petty personal gains, so on and so forth. But despite political turmoil and social indiscipline, appreciable progress was achieved by us over the last decade or so in contrast to economic depression in Europe and elsewhere.
But we can hardly afford to be complacent. Economists and experts, who matter, have forecast a tougher time ahead. It is true that we have the potential to raise our macro-economic growth rate to 9-10 per cent per year and attain medium level of human development indicators (HDI). We also have a number of challenges lying ahead of us. The big challenges of the forthcoming national budget are: improving efficiency in administrative management, bringing about honesty and transparency, infusing dynamism in private investment, formulating realistic revenue collection plan for financing the budget, strengthening employment-based growth and consolidating social protection to reduce income gap at individual and regional levels.
At the same time, budget implementation, revenue collection, expenditure control and fostering discipline in the economy, remain to be major tasks.
Understandably, the reason for shortfall in revenue collection during the FY 2013-14 was political unrest. A state of normalcy has now returned and therefore the policy of collecting more revenue through direct taxation should be continued. Corporate taxes should not be reduced and greater attention should be given to income tax.
In Bangladesh, 10 per cent of our people, i.e., four million families control 37 per cent of our income and wealth, of which 1.2 million families pay taxes. Since direct tax is one of the main revenue earners for a country, it is crucial that the remaining 2.8 million families should be brought under tax net. That means, the number of taxpayers should be increased. Over the years, indirect tax net of VAT has been increased, but there has hardly been any increase in the area of direct taxes. There has been some improvement in tax management since the last year, and introduction of eTIN is an important step forward. Steps are also being taken to increase tax-GDP (gross domestic product) ratio to 13 per cent from the present 10 per cent. But the fact remains that wealthy sections of society do not pay taxes in right proportion.
Corporate taxes should not be reduced, but direct and indirect taxes and duties could be more efficiently organised. Improvement in tax management is a lengthy process and cannot be achieved overnight. The inconsistencies therein should be removed.
Total revenue income for current year is Tk 1,250 billion and that of next fiscal year has been estimated as Tk 1,490 billion.    
In an expanding economy like that of ours, the biggest problem remains to be lack of investment or a stagnant investment scenario. This is at a time when increase in investment flow remains to be one of the key drivers of economic development. It deserves to be addressed with special focus. Economists and businessmen alike have emphasised on the need for bulk allocation in infrastructure and energy to overcome stagnancy in investment. They have also prioritised industrialisation, without which expected growth cannot be achieved, not to speak of materialising the dream of becoming a middle-income country.
Tax structure for sale and registration of land and apartments in urban areas should be rationalised which will ensure higher revenue collection. Land price is increasing at hyper speed. In order to collect income tax on actual buying and selling prices of land, concept value of land should be brought at par with its market value and rate of taxation should be reduced. If transparency is ensured in registration process, there may be a manifold rise in revenue income. In the same way, if tax rate per square metre of construction and sale/purchase of apartments is justifiably reduced and tax collection efficiency is increased, it will yield positive results. While in the name of cooperatives, many flats/apartments remain out of the purview of registration, efforts should be made to get those registered in a tax-friendly manner.
Budget deficit influences the share prices in the stock market. Realistic steps should be taken for reconstitution of the capital market and introduction of share, debenture and financial derivatives. For an appropriate system to develop capital market, appropriate policies should be framed and at the same time, a system for implementation of the policies should be in place.
Most probably the next budget will not allow black money to be turned white. This is a commendable initiative, but it may induce flight of capital from the country. In the last financial year, Tk 140 billion was made white and the NBR earned Tk 15 billion as tax.
Price inflation which reduces buying power, has been projected at 7.0 per cent for the next year. Attempts should be made to reduce the same. Growth rate for next year has been projected as 7.3 per cent. Projected growth rate for the current year could not be achieved due to political turmoil and it is hoped that a similar situation will not exist during the coming financial year.
Local industries should be allowed protection in order to survive competition from imported products. At present, the agriculture sector enjoys subsidy worth 1.0 per cent of GDP, which should be increased to help the poor and marginal farmers. Development that is taking place in rural infrastructure should be maintained. In order to make progress in poverty reduction, a sustainable and pragmatic approach should be undertaken in the light of changing situation and realistic needs.
For a developing country like Bangladesh which aspires to be a middle-income country, the national budget is of great significance. As far as we can gather, the size of the national budget for 2014-15 to be announced by the Finance Minister, will be of about Tk 2,500 billion against last year's allocation of Tk 2,110 billion. The proposed budget of this size will again be termed as a deficit budget. It is estimated that the size of the deficit will be around Tk 680 billion, of which Tk 400 billion will be collected from internal sources, including Tk 250 billion from the banking sector and Tk 150 billion from non-banking sectors. On the other hand, Tk 280 billion will come from external sources.
In order to implement development activities on priority basis, the national budget should be prepared with a pragmatic approach and should include infrastructural reforms, construction of physical infrastructure and a guideline for improvement of transport and communication facilities. The budget should be utilised effectively to spur development. Monitoring of implementation is crucial and therefore, the ADP (Annual Development Programme) should contain a month-wise implementation plan so that the task of monitoring and evaluation is made easier.
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