The proposed non-development expenditure of Tk. 53,114 crore and the ADP of Tk. 26,500 crore are realistic, but have worrisome features in that there is a Tk. 8,610 crore increase in non-development expenditure compared to the revised of the current fiscal year, revenue surplus generated for financing ADP is only Tk. 3,700 crore and that 85% of the ADP resources must come from borrowings -- both local and foreign. The success of the budget will depend on the twin factors of resource mobilization and implementation.

Assumption of Tk. 7,523 crore of accumulated loss of BPC by the government is a practical move, but its financing through issue of government guaranteed bonds should not call for budgetary allocation of this amount in 2007-2008.

The market is starving for good investment securities. Government guaranteed 10 year tax-free redeemable bonds at 11% interest, issued by BPC, should attract investments from the banking and non-banking institutions, insurance companies, corporate bodies and private individuals.

The target of Tk. 13,451 crore of non-tax revenue can be achieved only if the caretaker government decides to privatize Agrani Bank and BSRS. Conservatively, these two institutions should fetch around Tk. 2,500 crore.

The 45% tax-rate for non-listed mobile phone companies is welcome, but the government should consider a rider that at least 40% of the total equity would have to be disinvested through IPO and private placement with financial institutions.

Foreign banks operating branches in Bangladesh should similarly be given tax incentives for local incorporation and public listing -- 55% tax for non-listed banks as against 45% for the listed ones.

The 55% and 45% tax-rates respectively for un-listed and listed mobile phone companies may also be considered. Mobile phone companies and branches of foreign banks together accounted for 46% of the total net outflow of FDI between 2001 and 2005.

Raising of the ceiling of tax-exempt income from Tk.1.20 lacs to Tk. 1.50 lacs will result in substantial loss of revenue as thousands of existing tax-payers will go out of the tax-net, and those remaining will pay reduced taxes.

It is interesting to note that while presenting the budget for 2006-2007, the then finance minister proposed "to keep the ceiling of tax-exempt income, income slabs and the tax rates at the same level for the income year 2007-2008, as was the case for the assessment year 2006-2007 for the individual assessee."

Tax incentives for energy conservation are absent in the budget. To encourage corporate executives to use automobiles of lower horsepower, 10% and 15% should be added to the basic pay for using official automobiles above 1600 CC and 2000 CC, respectively. For vehicles running on CNG, nothing should be added to the basic pay.

Re-introduction of judicial members in the Taxes Appellate Tribunal will instill confidence among the taxpayers that they will receive fair treatment of their genuine grievances, and references to the High Court will be substantially reduced.

Similarly, the Tax Ombudsman Act should be amended to make the ombudsman an effective institution. His Lordship does not even enjoy the powers of a 3rd class Magistrate.

Nevertheless, the finance advisor deserves congratulations and our full support for his valiant effort to come up with a budget generally acceptable to all the political parties.

Md. Matiul Islam is a Former Finance Secretary.