Muhammad Mahboob Ali :
The national budget for the upcoming fiscal year 2017-18, presented by Finance Minister AMA Muhith at the Parliament targeted 7.4 percent GDP growth rate and total size is Taka 400,266 crore.
.He argued that VAT Act 2012 will be effective from 1 July 2017 which will add significant momentum in revenue collection. In this backdrop, we have estimated revenue collection for the next fiscal year at Tk. 2,87,991 crore (13 percent of GDP).Out of this, Tk.2,48,190. crore (11.2 percent of GDP) will accrue from NBR sources. In FY 2017-18, target of Non-NBR tax revenue collection has been fixed at Tk.8,662. crore (0.4 percent of GDP). The target of non-tax revenue collection has been set at Tk.31,179.crore (1.4 percent of GDP). Properly monetary, fiscal and exchange rate policy need to be coordinated. Excise duty on bank account has been well criticized starting from maximum Parliamentarians to general public which is likely to be revised.
However, bigger budget proposed but it was necessary to mobilize of greater volume of revenue. The people involved in the budget preparation would have to burn enough midnight oil to locate sources that would fetch higher revenue on a sustainable basis. None would contest the fact that the government does need higher revenue to help the country achieve the middle-income country status by 2021. But it need to bring those who are not regularly giving direct taxes and also those who did not pay VAT. The Finance Minister said in the proposed budget, the VAT-free turnover ceiling has been raised to Tk 36 lakh from Tk 30 lakh while the threshold for registration under VAT has been raised from Tk 80 Lakh to 1.5 crore. But not at the cost of double taxation system.
During the last few years, there had been a notable increase in the size of the budget. When the present government came to the power for the second term in the year 2014, the size of the budget in that fiscal year (2014-15) was worth Tk.2.39 trillion. In the subsequent two years, the budget size kept increasing to Tk. 2.64 trillion in FY 2015-16 and Tk. 3.40 trillion in FY 2016-17.
It is important, however, to look at the mobilisation of revenue—both tax and non-tax— in the context of the size of the annual budget. Though the tax revenue collected by the National Board of Revenue (NBR) recorded growth between 14 and 19 per cent in recent years, it was less than the targets set by the government. There is no denying that tax generation in the country has been far below its actual potential because of a number of factors including inefficiency in tax administration and poor coverage of potential tax sources. And we should not follow the path of Greek Nation as they did not want to pay taxes.
A sector-wise analysis would give a clear picture about the state of tax revenue generation. In the last fiscal year, almost 20 per cent (Tk. 300 billion) of the internal tax revenue came from four large sectors such as telecom, gas, tobacco and real estate. All these sectors except the real estate registered growth during that year with gas leading the chart. Tax revenue from gas sector grew 52 per cent against that the previous year, followed by tobacco and telecom with growth rates estimated at 14 per cent and 7 per cent respectively.
Combined with the factor of skewed internal revenue dependence, the Finance Minister has yet another factor to worry about when he looks for ways to meet the revenue need for the upcoming ambitious budget. That is the sluggish nature of the global economy. Brexit is already impacting the country’s RMG sector. Remittance inflow has remarkably slowed down. This year it is expected to grow at 7 per cent. An Asian Development Bank report projects it to grow at only 4 per cent next year. The fall in remittance earnings has come in contrast to the rise in the flow of manpower, particularly to the Gulf countries, in recent months. This might be due to the fall in wages in these countries in the wake of the falling oil revenues. Import tariff remains unchanged which is good attempt. However, due to debacle on natural calamities import tariff on rice has recently changed. Some measures have been taken for import substitution industrialization process.
The prospect remains rather clouded as far as the external sector is concerned because of the rising global political tension that sets the world economy for another challenging year ahead. Hence with a view to minimizing the impact of a worsening global economic situation, the Finance Minister is left with no option other than looking at the domestic market to support his upcoming ambitious budget. In the budget speech he declared that as per provisional estimates of Bangladesh Bureau of Statistics, by the end of current fiscal year, our per capita income will grow to USD 1602 which was only USD 543 in FY 2005-06. During the same period, poverty and extreme poverty has been reduced to 23.2 and 12.9 per cent from 38.4 and 24.2 percent respectively.
Bangladesh simply cannot afford to take a blow from external sources nor can it continue to depend on few sectors to support the wheels of the economy. The government currently has 7 mega projects in its hand, the largest of which is the Padma Bridge. The metro rail project comes next. Infrastructural development projects are well recognized for improvement of the economy.
The writer is a professor of Macroeconomics and Financial economist of Dhaka School of Economics. Email:[email protected]
The national budget for the upcoming fiscal year 2017-18, presented by Finance Minister AMA Muhith at the Parliament targeted 7.4 percent GDP growth rate and total size is Taka 400,266 crore.
.He argued that VAT Act 2012 will be effective from 1 July 2017 which will add significant momentum in revenue collection. In this backdrop, we have estimated revenue collection for the next fiscal year at Tk. 2,87,991 crore (13 percent of GDP).Out of this, Tk.2,48,190. crore (11.2 percent of GDP) will accrue from NBR sources. In FY 2017-18, target of Non-NBR tax revenue collection has been fixed at Tk.8,662. crore (0.4 percent of GDP). The target of non-tax revenue collection has been set at Tk.31,179.crore (1.4 percent of GDP). Properly monetary, fiscal and exchange rate policy need to be coordinated. Excise duty on bank account has been well criticized starting from maximum Parliamentarians to general public which is likely to be revised.
However, bigger budget proposed but it was necessary to mobilize of greater volume of revenue. The people involved in the budget preparation would have to burn enough midnight oil to locate sources that would fetch higher revenue on a sustainable basis. None would contest the fact that the government does need higher revenue to help the country achieve the middle-income country status by 2021. But it need to bring those who are not regularly giving direct taxes and also those who did not pay VAT. The Finance Minister said in the proposed budget, the VAT-free turnover ceiling has been raised to Tk 36 lakh from Tk 30 lakh while the threshold for registration under VAT has been raised from Tk 80 Lakh to 1.5 crore. But not at the cost of double taxation system.
During the last few years, there had been a notable increase in the size of the budget. When the present government came to the power for the second term in the year 2014, the size of the budget in that fiscal year (2014-15) was worth Tk.2.39 trillion. In the subsequent two years, the budget size kept increasing to Tk. 2.64 trillion in FY 2015-16 and Tk. 3.40 trillion in FY 2016-17.
It is important, however, to look at the mobilisation of revenue—both tax and non-tax— in the context of the size of the annual budget. Though the tax revenue collected by the National Board of Revenue (NBR) recorded growth between 14 and 19 per cent in recent years, it was less than the targets set by the government. There is no denying that tax generation in the country has been far below its actual potential because of a number of factors including inefficiency in tax administration and poor coverage of potential tax sources. And we should not follow the path of Greek Nation as they did not want to pay taxes.
A sector-wise analysis would give a clear picture about the state of tax revenue generation. In the last fiscal year, almost 20 per cent (Tk. 300 billion) of the internal tax revenue came from four large sectors such as telecom, gas, tobacco and real estate. All these sectors except the real estate registered growth during that year with gas leading the chart. Tax revenue from gas sector grew 52 per cent against that the previous year, followed by tobacco and telecom with growth rates estimated at 14 per cent and 7 per cent respectively.
Combined with the factor of skewed internal revenue dependence, the Finance Minister has yet another factor to worry about when he looks for ways to meet the revenue need for the upcoming ambitious budget. That is the sluggish nature of the global economy. Brexit is already impacting the country’s RMG sector. Remittance inflow has remarkably slowed down. This year it is expected to grow at 7 per cent. An Asian Development Bank report projects it to grow at only 4 per cent next year. The fall in remittance earnings has come in contrast to the rise in the flow of manpower, particularly to the Gulf countries, in recent months. This might be due to the fall in wages in these countries in the wake of the falling oil revenues. Import tariff remains unchanged which is good attempt. However, due to debacle on natural calamities import tariff on rice has recently changed. Some measures have been taken for import substitution industrialization process.
The prospect remains rather clouded as far as the external sector is concerned because of the rising global political tension that sets the world economy for another challenging year ahead. Hence with a view to minimizing the impact of a worsening global economic situation, the Finance Minister is left with no option other than looking at the domestic market to support his upcoming ambitious budget. In the budget speech he declared that as per provisional estimates of Bangladesh Bureau of Statistics, by the end of current fiscal year, our per capita income will grow to USD 1602 which was only USD 543 in FY 2005-06. During the same period, poverty and extreme poverty has been reduced to 23.2 and 12.9 per cent from 38.4 and 24.2 percent respectively.
Bangladesh simply cannot afford to take a blow from external sources nor can it continue to depend on few sectors to support the wheels of the economy. The government currently has 7 mega projects in its hand, the largest of which is the Padma Bridge. The metro rail project comes next. Infrastructural development projects are well recognized for improvement of the economy.
The writer is a professor of Macroeconomics and Financial economist of Dhaka School of Economics. Email:[email protected]
