Budget assessment by Dr. Salehuddin and Dr. Zahid

The proposed budget for fiscal 2019-20 has kept alive the previous tradition of whitening black money even in easier way than maintaining legal money, brushing aside all criticism.

Before the December 2018 national polls, the ruling Awami League party’s election manifesto promised strong measures against those having undisclosed money.

Black money holders will not face any question about the sources of their income if they invest in economic zones and high-tech parks by paying a tax of only 10 percent on the amount invested, which for regular taxpayers is between 10 and 30 percent, depending on the income. The scheme will be open till June 2024.

“With a view to drive up investment and create employment, I propose a new provision in the income tax law to accept investment in economic zones and high-tech parks, without any question on the sources of the invested fund by the income tax department,” Finance Minister AHM Mustafa Kamal said during his budget speech.

According to economists, for achieving the target of revenue collection, more time-befitting initiatives and administrative skills are essential.

Meanwhile, the finance minister said in his budget speech that 30 million new jobs will be created by 2030. But it is not specified how these jobs will be created and in which sectors. 

Country’s two prominent economists Dr. Salehuddin Ahmed and Dr. Zahid Hossain pointed out the above issues in analyzing the proposed budget for fiscal 2019-20.   

Dr. Salehuddun Ahmed

There is nothing new and innovative in the first budget speech of the new finance minister, economist and former governor of Bangladesh Bank Dr. Salehuddin Ahmed said.

He opined that the finance minister has just followed the previous tradition. “He informed to take some initiatives including creating of 30 million new jobs by 2030. But he did not clarify it -- how it will be possible and in which sectors.”

Ahmed added that a huge income target has been fixed up in the proposed budget. The greater part of this income will be generated by the National Board of Revenue (NBR).

It means that government will put emphasis on Value Added Tax (VAT), or tax collection, Ahmed said, adding that in reality there is already a huge deficit in reaching the revenue collection target in the current fiscal.

“It is not practically sensible to take plan of collecting huge revenue in near future. Deficit may be increased in the current management,” he said.

Ahmed warned that government may take huge loan from banking sector to fulfil the deficit. It will hamper investment in private sector, putting pressure on country’s overall banking system.   

He said, government has to manage huge money to pay bank interest like some other countries.

Ahmed urged the government paying heed to all sorts of tax collection including income tax. “Tax collection management should be more modern and developed.”

The volume of revenue collection should be extended so that government's dependency on Banking sector can be minimized to fulfil the deficit.  

The former governor said that government must increase investment to achieve the goal of 8.2 percent growth in the coming fiscal. “Especially the investment in private sector should be increased by 34 percent from the existing 32 percent.”

“Government must create investment friendly environment in the country to restore confidence among the investors in private sector,” he opined.   

About the opportunity to whiten black money he said that this illegal currency is now very strong in country’s economy. For this reason, government is allowing every year to whiten black currencies.

“It is difficult to say how much benefit it will bring in the long run for country’s economy. Government should allow the black money holders this opportunity for one time only with 30 percent tax charge,” Ahmed said, adding that after one chance government should handle the black money holders with hard hand.    

Dr. Zahid Hossain

However, the chief economist of the World Bank Dhaka office Dr. Zahid Hossain has marked the proposed budget as implementable.

He said, some implementation-oriented amendments are important here for stability, removing discrimination and achieving growth. 

“There is target and allocation in the budget speech. But there are some questions also,” he said and added that the target of revenue collection has been fixed up above 19 percent while the target of expenditure is 18 percent.”

This budget is more achievable than that of in the previous year.

He, however, expressed concern on government’s loan from banking sector and liquidity crisis in country’s banks.

He urged on initiative to book the loan defaulters. Fund crisis can be solved in a large scale if at least a part of the defaulted loan can be channeled in, Hossain opined.     

Hossain also criticized the opportunity of whitening black money by only 10 percent tax charge. He termed it as one kind of patronization to black money, or illegal currency.

He alleged that it was said earlier that the black money holders would also be penalized along with 10 percent tax charge. But the option of penalty is not seen in the budget speech this time.

“It will encourage white money holders to take the path of black money owners as the latter is allowed to whiten their illegal money paying less tax.”

Protecting black money is now easier than white money, the economist observed and urged the government to pay heed to this destructive trend for the long-term sustainability of country's economy.

Hossain emphasized on inclusion of untouched tax payers and in this regard administrative skill is a must.

He pointed out that it takes huge time in project management in most cases. As a result, expenditure is increased. “Our purchase procedures, project design and monitoring system must be amended”.

Kamruzzaman