Dr. Anu Mahmud :
Business leaders and associations, in their response to the new budget, have clearly stated what we as citizens have long felt. In simple terms, the success of the economy or a full implementation of budgetary measures depends in the ultimate analysis on the degree of good governance that will come our way.
It is true that despite so much of instability and political disorder in the recent past the economy has somehow held its own. But imagine how much more could have come the nation’s way if politics had been pursued along truly democratic lines. Tolerance is not merely a matter of letting the other person state his opinions. It is also in forging a consensus on the way in which a country is to be administered.
While governance and political stability are imperative for any economic measure to take effect, there is too the need, as the business leaders have pointed out, for a regular supply of power and gas to our industries if they are expected to show good performance.
All good intentions on the part of the Finance Minister will only end up being platitudes unless they are backed by resolute action. An important part of the action ought to come in the form of the government opening and maintaining lines of communication with political parties in the opposition, both within and outside parliament, business circles and broad sections of society on issues affecting the daily life of the people. A forward-looking economy needs a stable democracy to produce the needed results.
The budget relies heavily on revenue generation. A wide variety of goods will now be taxed ranging from bottled water to a new range of taxation on mobile phones, jewellery to sales tax on real estate. Though revenue is bound to increase, so will the retail prices of all products that have been brought under the purview of tax net. The budget however has been welcomed by business leaders as ‘investment friendly’. Taxes and duties waived on fire safety equipment should go a long way in retrofitting factories across the RMG sector and should help in addressing fears for workers’ safety. The various chambers of commerce have welcomed the steps taken, for instance, offer of 20 per cent tax rebate for factory relocation away from Dhaka should encourage both the tannery industry and other sectors to move away from the capital city.
All is not however positive. Once again, holders of black money have been given opportunity to legalise undisclosed monies by investing in real estate sector. The move has been slammed by economists as having such provision is discriminatory in that it discourages honest taxpayers and fosters culture of tax evasion. For the average consumer, the budget brings both more of good than bad tidings. Healthcare should cost less as duties have been reduced on 40 basic raw materials used to make medication. Taxes have also been waived on bonds and savings certificates up to Tk 500,000. On the whole, the budget provides a sense of direction but doesn’t enunciate the way to reach there.
The Finance Minister in his post-budget discussion on Friday said that the proposed budget for the year 2014-15 will not provide any opportunity to legalise black money, though the minister mentioned nothing about the controversial provision in his budget speech. Nonetheless, we would like to accept it as a true considerable assertion of the Finance Minister and expect that the decision will compel the vested quarters to bring into the legal taxation system those who have illegal secret money. But we think that merely a public announcement without taking formal measures is unlikely to make any significant dents on black money, which is so large that it is considered a parallel economy.
According to available data, the size of the underground economy, the nursing ground of black money, consists of around o per cent of the country’s total GDP. In between fiscal 1971-72 and fiscal 2012-13, some Tk 13,808 crore money was whitened, with the NBR receiving taxes of Tk 1,455 crore during this 43-year period, which is just around 1 percent of the revenue target in the proposed budget for the upcoming fiscal.
From July last year to April this year, the National Board of Revenue received only Tk 26 crore through money whitening facility. Economists therefore expressed their concern with money whitening decisions as black money invested in the real estate sector during the recent couple of years has turned blacker because the price of the purchased flats or lands was declared much lower in the papers than the actual one in a bid to evade tax. By all counts, the amount so added to the exchequer is too insignificant. But unfortunately no government has been serious about unearthing black money. Moreover, the proposed budget placed in the Parliament on June by itself is such that it provides many loopholes for corruption.
It will eventually help in generating black money no doubt. So it is equally important to set the taxation policy to include anti-black money features. The system has been so lenient that tax evaders seldom feel the heat. Honest taxpayers should be encouraged and tax- evaders punished are followed more in principle than in practice. More often than not, income tax raids are conducted on a selective basis demeaning the political and business rivals of those in power.
What’s worse, even banks have been found to be helping their customers to evade taxes. The government must use all its punitive powers to deal with tax-evaders and flush out all the unaccounted money.
Undisclosed amnesty to black money in the proposed budget is an attempt to help the leaders and workers of the ruling party and the government functionaries who have amassed huge illegal wealth. We ask the government to take steps to clean the ruling party leaders along with dishonest businesses and public servants who are similarly avoiding declaration of their wealth and avoiding taxes. The issue of black money is easy to talk but difficult to deal with. So, first close the loopholes to create black money by making laws. Otherwise, what the Finance Minister discussion pledged to the nation in his post-budget ii will just be gossip that we don’t want to believe.
In an apparent belated realisation, the Finance Minister AMA Muhith has finally pointed fingers to the politically appointed directors of the state-owned banks for a series of loan scams over the last several years. He acknowledged that there are always some persons appointed by the government on political consideration in the banks.
He went on saying that directors of state-owned banks were found involved in loan scandals and misappropriation of funds. He said that he is planning to prepare a criteria for appointment of directors to avert such unwarranted situations in the future. He also blamed Bangladesh Bank for poor monitoring of the banks.
But critics said these realisations by our octogenarian Finance Minister would not bring any benefit to the ailing state-owned banks inundated by loan scandals, if no action is taken. Otherwise such things would continue to happen and the financial sector would bear the brunt they said.
In a surprising note, newspapers reported that, Kazi Firoz Rashid MP from the Mohajot alliance has directly accused the FM for bank scams. Such kind of allegations from within the government gives a strong signal that something is terribly wrong with the FM.
We believe that a much quicker realisation of the real situation at the field by the government could have saved the state-owned banks.
In fact, FM remarks sound very hollow, when the government could not yet recover a single penny from the Hall-Mark Group since the massive irregularities by the bank management and dishonest officials of Hall-Mark Group were detected in 2012. Even the government has not dissolved the board of directors led by Chairman Sheikh Abdul Hye Bachchu in BASIC Bank despite recommendations by the Bangladesh Bank almost a month ago. Muhith’s findings would be meaningful only when the errant directors would be brought to book. Another thing is not understandable, why Bangladesh Bank is so much lenient. It is an independent organisation, if it works like a party apparatus obeying party leaders, nationalized Banks have become a looting spot of public money by the party in power men.
Finance Minister has at last come to a right conclusion but is he the person who shall be able to decide and implement, that is the big question. The general impression is ministers do not decide, the PM’s advisers do. Finance Minister should not suffer from illusion of success, he is there to take the blame of failures.
Finance Minister AMA Muhith has set a good target and strategy to reach over 7 per cent growth next year and 10 per cent by 2021. His ambitions are bold – to hike industry share in national growth to 40 per cent from 25 per cent, to move big projects in public-private partnership, and to queeze out more revenue.
However, the Finance Minister has tried to do his best in many areas, industry being one. He has encouraged a decentralisation of industries with special benefits. The budget means to help a number of key sectors, including pharmaceuticals, shipbuilding, tyres, poultry, textiles and above all readymade garments.
But his growth target of 7.3 per cent for next year will certainly fall flat. According to the Bangladesh Bureau of Statistics, one needs Tk 4.7 investment for every Tk 1 output. At this configuration, a 7.3 per cent growth will need a 34 per cent GDP-investment ratio. With the current 29 per cent, it means a 5-per cent age point improvement. Such an increase is unprecedented. The It 2,50,506 crore-budget hinges on an ambitious revenue target, putting a question mark on its feasibility. The revenue generation target has been set at Tk 182,954 crore, an increase of 16.77 percent from the outgoing year revised target. The pro posed budget has set an overall deficit of It 67,552 crore, of which net foreign financing would be Tk 24,275 crore and domestic financing Tk 43,277 crore. Banks will be a major source to finance budget deficit, and the government has set the borrowing target at Tk 31,221 crore.
Unfortunately bold dreams and ambitions fall flat when faced with reality-and in this case the reality is rather dire. It will be extremely difficult to increase the GDP-investment ratio in this situation of uncertainty caused by the political situation. It will be even more difficult for the revenue targets to be met despite the taxes on the super-rich. While he has targeted the extreme poor with Tk 1500 crore in government support one wonders whether the amounts will actually benefit those who are actually poor and not go to those not in need.
The proposed budget looks at growth from a long list of mega projects. But how many of those projects will come through and at what implementation rate is a huge question. There are areas where the Finance Minister has remained rather vague. For example, he has not said anything new about physical infrastructure, planned urbanisation or overseas employment. A lack of specifics makes one wonder whether these vital issues will be addressed in their proper importance.
What the Finance Minister has to remember is that small can be beautiful – one does not need increasingly huge budgets to attain economic growth – what the nation needs is that the amounts spent are spent efficiently – a budget half this size where every taka is efficiently spent and not wasted is more important than one where only 50 per cent of the amount spent is efficiently utilised.
It is our firm belief that our citizens would rush to pay their taxes if they knew that they were being properly utilised – they could send their children to proper schools and colleges, they could get easy access to parks and playgrounds, they could use roads which do not need to be dug up and rebuilt every year at a huge public expense. Public money should be held sacred– this single concept, if applied, would increase our tax revenues . Unfortunately we spend money on the whims of our public servants who don’t worry about how difficult it was to enable us to pay taxes in the first place.
Business leaders and associations, in their response to the new budget, have clearly stated what we as citizens have long felt. In simple terms, the success of the economy or a full implementation of budgetary measures depends in the ultimate analysis on the degree of good governance that will come our way.
It is true that despite so much of instability and political disorder in the recent past the economy has somehow held its own. But imagine how much more could have come the nation’s way if politics had been pursued along truly democratic lines. Tolerance is not merely a matter of letting the other person state his opinions. It is also in forging a consensus on the way in which a country is to be administered.
While governance and political stability are imperative for any economic measure to take effect, there is too the need, as the business leaders have pointed out, for a regular supply of power and gas to our industries if they are expected to show good performance.
All good intentions on the part of the Finance Minister will only end up being platitudes unless they are backed by resolute action. An important part of the action ought to come in the form of the government opening and maintaining lines of communication with political parties in the opposition, both within and outside parliament, business circles and broad sections of society on issues affecting the daily life of the people. A forward-looking economy needs a stable democracy to produce the needed results.
The budget relies heavily on revenue generation. A wide variety of goods will now be taxed ranging from bottled water to a new range of taxation on mobile phones, jewellery to sales tax on real estate. Though revenue is bound to increase, so will the retail prices of all products that have been brought under the purview of tax net. The budget however has been welcomed by business leaders as ‘investment friendly’. Taxes and duties waived on fire safety equipment should go a long way in retrofitting factories across the RMG sector and should help in addressing fears for workers’ safety. The various chambers of commerce have welcomed the steps taken, for instance, offer of 20 per cent tax rebate for factory relocation away from Dhaka should encourage both the tannery industry and other sectors to move away from the capital city.
All is not however positive. Once again, holders of black money have been given opportunity to legalise undisclosed monies by investing in real estate sector. The move has been slammed by economists as having such provision is discriminatory in that it discourages honest taxpayers and fosters culture of tax evasion. For the average consumer, the budget brings both more of good than bad tidings. Healthcare should cost less as duties have been reduced on 40 basic raw materials used to make medication. Taxes have also been waived on bonds and savings certificates up to Tk 500,000. On the whole, the budget provides a sense of direction but doesn’t enunciate the way to reach there.
The Finance Minister in his post-budget discussion on Friday said that the proposed budget for the year 2014-15 will not provide any opportunity to legalise black money, though the minister mentioned nothing about the controversial provision in his budget speech. Nonetheless, we would like to accept it as a true considerable assertion of the Finance Minister and expect that the decision will compel the vested quarters to bring into the legal taxation system those who have illegal secret money. But we think that merely a public announcement without taking formal measures is unlikely to make any significant dents on black money, which is so large that it is considered a parallel economy.
According to available data, the size of the underground economy, the nursing ground of black money, consists of around o per cent of the country’s total GDP. In between fiscal 1971-72 and fiscal 2012-13, some Tk 13,808 crore money was whitened, with the NBR receiving taxes of Tk 1,455 crore during this 43-year period, which is just around 1 percent of the revenue target in the proposed budget for the upcoming fiscal.
From July last year to April this year, the National Board of Revenue received only Tk 26 crore through money whitening facility. Economists therefore expressed their concern with money whitening decisions as black money invested in the real estate sector during the recent couple of years has turned blacker because the price of the purchased flats or lands was declared much lower in the papers than the actual one in a bid to evade tax. By all counts, the amount so added to the exchequer is too insignificant. But unfortunately no government has been serious about unearthing black money. Moreover, the proposed budget placed in the Parliament on June by itself is such that it provides many loopholes for corruption.
It will eventually help in generating black money no doubt. So it is equally important to set the taxation policy to include anti-black money features. The system has been so lenient that tax evaders seldom feel the heat. Honest taxpayers should be encouraged and tax- evaders punished are followed more in principle than in practice. More often than not, income tax raids are conducted on a selective basis demeaning the political and business rivals of those in power.
What’s worse, even banks have been found to be helping their customers to evade taxes. The government must use all its punitive powers to deal with tax-evaders and flush out all the unaccounted money.
Undisclosed amnesty to black money in the proposed budget is an attempt to help the leaders and workers of the ruling party and the government functionaries who have amassed huge illegal wealth. We ask the government to take steps to clean the ruling party leaders along with dishonest businesses and public servants who are similarly avoiding declaration of their wealth and avoiding taxes. The issue of black money is easy to talk but difficult to deal with. So, first close the loopholes to create black money by making laws. Otherwise, what the Finance Minister discussion pledged to the nation in his post-budget ii will just be gossip that we don’t want to believe.
In an apparent belated realisation, the Finance Minister AMA Muhith has finally pointed fingers to the politically appointed directors of the state-owned banks for a series of loan scams over the last several years. He acknowledged that there are always some persons appointed by the government on political consideration in the banks.
He went on saying that directors of state-owned banks were found involved in loan scandals and misappropriation of funds. He said that he is planning to prepare a criteria for appointment of directors to avert such unwarranted situations in the future. He also blamed Bangladesh Bank for poor monitoring of the banks.
But critics said these realisations by our octogenarian Finance Minister would not bring any benefit to the ailing state-owned banks inundated by loan scandals, if no action is taken. Otherwise such things would continue to happen and the financial sector would bear the brunt they said.
In a surprising note, newspapers reported that, Kazi Firoz Rashid MP from the Mohajot alliance has directly accused the FM for bank scams. Such kind of allegations from within the government gives a strong signal that something is terribly wrong with the FM.
We believe that a much quicker realisation of the real situation at the field by the government could have saved the state-owned banks.
In fact, FM remarks sound very hollow, when the government could not yet recover a single penny from the Hall-Mark Group since the massive irregularities by the bank management and dishonest officials of Hall-Mark Group were detected in 2012. Even the government has not dissolved the board of directors led by Chairman Sheikh Abdul Hye Bachchu in BASIC Bank despite recommendations by the Bangladesh Bank almost a month ago. Muhith’s findings would be meaningful only when the errant directors would be brought to book. Another thing is not understandable, why Bangladesh Bank is so much lenient. It is an independent organisation, if it works like a party apparatus obeying party leaders, nationalized Banks have become a looting spot of public money by the party in power men.
Finance Minister has at last come to a right conclusion but is he the person who shall be able to decide and implement, that is the big question. The general impression is ministers do not decide, the PM’s advisers do. Finance Minister should not suffer from illusion of success, he is there to take the blame of failures.
Finance Minister AMA Muhith has set a good target and strategy to reach over 7 per cent growth next year and 10 per cent by 2021. His ambitions are bold – to hike industry share in national growth to 40 per cent from 25 per cent, to move big projects in public-private partnership, and to queeze out more revenue.
However, the Finance Minister has tried to do his best in many areas, industry being one. He has encouraged a decentralisation of industries with special benefits. The budget means to help a number of key sectors, including pharmaceuticals, shipbuilding, tyres, poultry, textiles and above all readymade garments.
But his growth target of 7.3 per cent for next year will certainly fall flat. According to the Bangladesh Bureau of Statistics, one needs Tk 4.7 investment for every Tk 1 output. At this configuration, a 7.3 per cent growth will need a 34 per cent GDP-investment ratio. With the current 29 per cent, it means a 5-per cent age point improvement. Such an increase is unprecedented. The It 2,50,506 crore-budget hinges on an ambitious revenue target, putting a question mark on its feasibility. The revenue generation target has been set at Tk 182,954 crore, an increase of 16.77 percent from the outgoing year revised target. The pro posed budget has set an overall deficit of It 67,552 crore, of which net foreign financing would be Tk 24,275 crore and domestic financing Tk 43,277 crore. Banks will be a major source to finance budget deficit, and the government has set the borrowing target at Tk 31,221 crore.
Unfortunately bold dreams and ambitions fall flat when faced with reality-and in this case the reality is rather dire. It will be extremely difficult to increase the GDP-investment ratio in this situation of uncertainty caused by the political situation. It will be even more difficult for the revenue targets to be met despite the taxes on the super-rich. While he has targeted the extreme poor with Tk 1500 crore in government support one wonders whether the amounts will actually benefit those who are actually poor and not go to those not in need.
The proposed budget looks at growth from a long list of mega projects. But how many of those projects will come through and at what implementation rate is a huge question. There are areas where the Finance Minister has remained rather vague. For example, he has not said anything new about physical infrastructure, planned urbanisation or overseas employment. A lack of specifics makes one wonder whether these vital issues will be addressed in their proper importance.
What the Finance Minister has to remember is that small can be beautiful – one does not need increasingly huge budgets to attain economic growth – what the nation needs is that the amounts spent are spent efficiently – a budget half this size where every taka is efficiently spent and not wasted is more important than one where only 50 per cent of the amount spent is efficiently utilised.
It is our firm belief that our citizens would rush to pay their taxes if they knew that they were being properly utilised – they could send their children to proper schools and colleges, they could get easy access to parks and playgrounds, they could use roads which do not need to be dug up and rebuilt every year at a huge public expense. Public money should be held sacred– this single concept, if applied, would increase our tax revenues . Unfortunately we spend money on the whims of our public servants who don’t worry about how difficult it was to enable us to pay taxes in the first place.
