Top 10pc of population own 35pc of national income : PRI

The Policy Research Institute of Bangladesh (PRI) said Tuesday the rich and powerful do not pay their fair share of taxes following serious governance problem in the tax system.
It said, in Bangladesh, the top 10 per cent of the population own 35 per cent of the national income while personal income taxes are a meagre 1.5 per cent of GDP (gross domestic product).
The PRI, however, said the budget of the current fiscal year has attempted to cover a part of the issue through a range of measures including taxation of capital gains from land and stocks.
These were stated in a PRI paper titled 'Implementing policy and institutional reforms of the fiscal year 2014-15 national budget', prepared by its vice chairman Dr Sadiq Ahmed.
The paper was presented at a PRI-sponsored seminar held at its city office Tuesday.
Former Finance Secretary Zakir Ahmed Khan moderated the programme while lead economist at the Dhaka office of the World Bank Dr Zahid Hussain attended it as a designated panellist.
While presenting his paper, Dr Sadiq Ahmed said there is a huge hole in the income tax system and it requires a much-needed reform.
Dr Sadiq Ahmed said a considerable attention needs to be given to concerned 'contingent liabilities'.
He said unfunded deficits of public enterprises, especially the Bangladesh Petroleum Corporation, have caused accumulation of a huge stock of debts of these non-financial public enterprises, mostly owed to public banks.
Dr Ahmed said the public-private partnership (PPP) is lacking a well-thought-out implementation strategy.
He said international experience shows that securing PPP financing for large infrastructure projects requires a managing entity that is equipped with seasoned and competent technical staff.
He noted that Bangladesh is lacking on this count in the field of PPP.
He also noted that without essential reforms, the ambitious US$11 billion dollar plus projects identified in the budget will not materialise.
He said there is a considerable capacity in Bangladesh outside the government which can help develop a good PPP policy and support its implementation.
"The finance minister could take a lead role in this respect," he added.
While speaking as a designated panellist, WB lead economist said Dr Zahid Hussain said the country might achieve 6.5 per cent economic growth in the ongoing fiscal year, but 'not the 7.3 per cent' as the government is aiming at, and that too will depend on revival of the stagnating private investment.
He said the fiscal targets are appropriate, but the only question remains whether it is appropriate relative to the country's ability to implement the budget.
"If you look at past experiences, then you have to say that it is probably ambitious relative to what we are able to collect and spend," he said.
He said increasing emphasis on completion of projects under the Annual Development Programme (ADP) is critical.
"I'm really worried this time because there are too many unapproved projects included in the ADP," Dr Hussain said.
He said 959 projects have been included in the Green Page of the ADP, which means these are unapproved and have no allocation.
But you can rest assured that a lot of the projects will find their way into the list of the approved projects or the While Page during the year.
He said the gate-keeping function needs to be strengthened.
He said the projects in the Green Pages don't mean they are automatically part of the ADP.
He said if the country can use 20 per cent of the aid money in the pipeline of US$ 19.4 billion, then a large fraction of the external financial target will be achieved in the current fiscal year.
He said the only way you can increase utilisation of the existing aid pipeline is by increasing the implementation of the foreign aid-supported projects in the ADP.
He said Bangladesh could not achieve the same level of economic development as many East Asian countries could despite starting the same level 43 years ago.
Dr Hussain said: "I've identified three factors which probably inhibit our development: political will, capacity and incentive."
He said through decentralisation, we can signal the political will for change, build capacity and solve the problem of aligning incentives with development performance.
He said: "If we want to improve service delivery on the ground both in urban and rural areas, decentralisation is a key. So, the government will have to do something credible about decentralisation."
Political buy-in is critical and will determine the success or failure of decentralisation, he said.
On the social safety net programmes, he said it seems that the country is moving in the opposite direction from what is envisaged in the draft National Social Protection Strategy.
"We could say that the PPP law will be passed in this session of the parliament, or we will establish two economic zones or make 50 per cent progress on them," Dr Hussain said.
Speaking at the programme, BIDS researcher Dr Binayek Sen said Bangladesh has been growing but it should look for quality growth.
"We mean inclusive growth and inequality should be removed," Dr Sen said.
He said healthcare is a challenge for the government as the number of healthcare-seeking people is on the rise.
Former Finance Secretary Siddiqur Rahman said Bangladesh should utilise foreign aid.
He said Bangladesh's reliance on foreign aid has fallen but it is due partly to lack of capacity of utilisation.
Dr Rahman was critical of the high interest payment saying this is now almost equal to domestic borrowing.