Wealth tax: need of the hour

A top government functionary yesterday called for imposition of wealth tax to discourage accumulation of unproductive assets.
“It is the demand of the day. It is necessary to make a law on wealth tax and impose tax,” Planning Minister AHM Mustafa Kamal said at a dialogue on an analysis of the proposed budget, organised by the Centre for Policy Dialogue.
He also touched upon the issue of black money, saying it is generated through concealment of the real transaction value of land. Kamal cited the high land-value in Gulshan and Banani areas as a case in point.
In practice, the real transaction value of land in those areas is not disclosed in the registration papers; a much lower figure is quoted to avoid tax.
“The system is helping create black money,” Kamal said, while suggesting confiscation of the land if a lower figure is put on the registration paper.
“Many would be scared of doing it if there is such a law.”
Discussants at the programme said the economy is unlikely to get a momentum without any improvement in the political atmosphere, governance and infrastructure.

“The private sector is the driver of growth in Bangladesh. But private investment will not rise if there is political instability, lack of good governance and infrastructure,” said Akbar Ali Khan, a former caretaker government adviser. Political consensus is necessary for economic development, said Khan, while urging the government to make efforts to that end.
Salehuddin Ahmed, former governor of Bangladesh Bank, said lower private investment and the sluggish pace of job creation remain major challenges to the economy even though some of the indicators such as inflation look favourable.
“Political uncertainty has to be really taken into account. If you believe in participatory development, you have to go for dialogue.”
But MA Mannan, state minister for finance and planning, said the increased public investment and tax benefits given in the upcoming fiscal year budget would lure in private investors. “We have received positive reactions.” Ahmed also warned the government about the risks of high borrowing from banks to finance the Tk 250,506 crore-budget.
“If business picks up, there will be dynamism in the economy, leading to increased demand for credit. So increased government borrowing may affect the credit flow to the private sector.”
Siddiqur Rahman Khan, former finance secretary, was in agreement with the former central banker in this regard.
Ahmed also criticised the government's plan to recapitalise the state-owned banks.
“Why should we give money to banks for their inefficiency and corruption? This is the worst use of public money.”
He expressed doubts about the feasibility of the tax collection target for fiscal 2014-15. “Besides, tax officials resort to the shortcut to tax collections. Instead of putting in efforts to find new taxpayers, they chase those who pay taxes regularly.”
Kamal too called for reforms in revenue administration, while remaining optimistic of hitting the budgetary targets.
Kazi Akram Uddin Ahmed, president of the Federation of Bangladesh Chambers of Commerce and Industry, stressed the need for the rule of law, transparency, accountability and e-tendering to ensure proper use of public money.
Mir Nasir Hossain, a former president of FBCCI, said the increased supply of gas to industries will encourage investments. “We will have to prioritise where we will supply gas. Is it going to be households, vehicles or industries?”
Personal security has become a big question mark in recent times besides political instability, Hossain said. “Investment will be discouraged if investors are worried about personal security.”
About the surcharge on high-income people, Hossain said the tax authority imposes more taxes on regular taxpayers because of its failure and inefficiency to increase its tax net. Mahabub Hossain, former director general of the Bangladesh Institute of Development Studies, criticised the government's reduced allocation for the agriculture sector.
“But we keep hearing from the government that agriculture will get priority,” he said, adding that increased fund is needed to develop improved seeds and farm technologies to ensure food security in the face of growing population and land scarcity.
Debapriya Bhattacharya, distinguished fellow of CPD, said budgetary targets should be fixed from the perspective of reality and implementation capacity. “Budgetary plans should be more rigorous and scientific.”
Shamsul Alam, member of Planning Commission, said constructive criticism does not come from the post-budget reaction.
“In the past, we have seen that the opposition party was absent in budget discussions and placed observations from the party's point of view.”
Rehman Sobhan, chairman of CPD, chaired the discussion.