Tax collection target too high: analysts
The higher revenue collection target in the proposed budget for the next fiscal year will create a clash between the tax collectors and taxpayers, said a leading economist yesterday.
The government proposed collection of an additional Tk 45,000 crore as revenue in the budget, which will create burden on the businesses.
“This is why almost all the chamber and trade body leaders disagree with the proposed tax structure,” said Akbar Ali Khan, an economist and former adviser to the caretaker government.
Following such clash, the expected investment from the private sector will be hampered.
As a result, the economy will suffer, Khan said in a discussion on the proposed budget at Brac University in Dhaka.
The clash between the tax collectors and taxpayers will also take place because of some ambiguities regarding the revenue collection in the budget proposal.
The collection of 15 percent value-added tax might create an inflationary pressure on the economy, he said, while calling for reduction of the VAT to 10-12 percent from 15 percent.
The former caretaker government adviser raised questions about the businessmen's motivations for lobbying against the proposed VAT law.
The VAT is paid by the consumers, he said. “Then why are the businessmen supporting a movement against the VAT law?”
Khan welcomed the government's intent to implement some mega projects with its own financing but questioned the quality of the work as corruption is rampant in the execution of such projects.
“Sometimes the standards of mega projects are so low that they become a burden for the economy.”
He, however, questioned if some of the mega projects in the work are needed at all.
“Before taking the decision, the government should think whether there is any necessity for some of the mega projects. Implementing unnecessary mega projects is possible only in Bangladesh as the budget is not widely debated and discussed in parliament.” Subsequently, he suggested discussing the budget in the standing committees of the national parliament, citing England, India, New Zealand and Australia as examples.
On the government's social safety net programmes, Khan said if the allocation in this sector is increased and more people brought under the scheme, the rate of corruption will go up and the number of unemployed will also increase.
“So, the government should design a system by which it can use the allocated money in any productive sector to serve the same purposes.”
AB Mirza Azizul Islam, another former adviser to the caretaker government, criticised the proposed cuts in allocation for the agricultural sector from next fiscal year.
The government instead could have proposed cuts for four unproductive sectors including public administration, defence, interests on borrowings and security, where nearly 40 percent of the budgetary allocation is assigned.
However, Islam welcomed the government proposal for higher allocations to the education and health sectors.
In Bangladesh, the tax-GDP ratio needs to be increased; the ratio should not be raised by more than 1 percent in a year, he said.
“It is not possible to increase the tax-GDP ratio overnight.”
Islam said black money should not be allowed for investment in any sector as such permissions have failed to yield any positive outcomes in the economy.
Abdul Bayes, director of Brac's research and evaluation division, said attracting more private sector investment is a challenge for the economy.
He went on to lay out four prime reasons for the poor private sector investment: no new gas connections, scarcity of industrial land, weak infrastructures and uncertain political situation.
“We need to overcome the sluggish private sector investment to achieve robust economic growth.”
He criticised the government's proposal to allocate money for strengthening the capital base of some scam-hit public banks.
“They have become weak financially for irregularities in disbursement.”
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