Staff Correspondent: Finance Minister AHM Mustafa Kamal has said the government is ready to offer more tax benefits to businesses in the budget for the forthcoming fiscal year to create employment opportunities by boosting investment and production in the private sector.
“The proposed budget is not final yet. We will remain flexible regarding taxation. Tax rates will be brought down in any sector if necessary. But no sector will see further hike in tax rates,” he said media in a briefing.
The proposed budget is entirely business-friendly, the finance minister mentioned, adding, “Since the government cannot create jobs, we have placed the private sector in the driving seat and provided them with necessary support.
“The target of the government is to create new jobs and generate revenue.” Mentioning that the business community faced injustice in the past, Minister Kamal said, “Those who earned more had to pay more taxes. But, the opposite should happen because people who can yield greater outputs using limited resources should get concessions.
“Reviewing all these matters, we tried to make rules easier and universal this time around.”
Even though the economy was performing poorly in various indicators in the wake of the Covid-19 outbreak, all the indicators are back in a positive state at present, said the minister, adding, “The proposed budget will boost investment. It will create new employment. The lives and livelihoods of the marginalised people will be protected through this.
“The budget has been made entirely business-friendly to keep economic activities vibrant. Hopefully, the business community will take this opportunity and increase investment and production. A rise in production will naturally result in more employment.” He further added that export-oriented sectors have been offered support under the “Made in Bangladesh” headline to help local production power. The finance minister also expressed hope that even if businesses have been given exemptions in various fields including reduction of corporate tax, the government’s revenue collection as per the target will not be hampered by all this.
“We will simplify tax management laws. In addition, revenue collection will increase, if we can accurately identify who should pay taxes.”
He continued to say various countries, including the United States, have tried to raise taxes to increase revenue collection. Similar attempts have been made in Bangladesh.
“But we think if tax rates are reduced, collections will increase. There will be a win-win situation for everyone.
Regretting that fiscal measures have not been actively applied to expand investment and businesses thus far, Kamal said only monetary support has been provided till now. This time a large number of fiscal measures have been taken, he added.
Stating that the debt-to-GDP ratio of Bangladesh is much less than 40%, the minister said this rate is almost 100% in India and China. Therefore, Bangladesh has the capacity to bear the deficit of 6.2% in the proposed budget.
“We have to increase expenditure. If the government does not spend, there will be no private investment and employment. That is why the deficit has to be increased. However, there is no risk in this.
“Moreover, during the July-May period of the current fiscal, exports grew by 13% and revenue grew by 11%. There was a high growth in inward remittances as well. So, I don’t see any problem in the loan target,” said the minister.
The Bangladesh Bureau of Statistics (BBS) is working to determine how many people have fallen below the poverty line in the wake of the pandemic. They are yet to provide any statistics in this regard.
However, the Bangladesh Institute of Development Studies (BIDS) has made a preliminary estimate that 26% of the people are currently living below the poverty line.
“After receiving the information from the BBS, we will compare it with that obtained from the BIDS and then decide what we can do for them. Necessary steps will be taken to bring them back into the mainstream of the economy,” he said
Asked why the proposed budget does not contain anything about whitening undisclosed money, even though he said just a week earlier that as long as undisclosed money remains, there will be an opportunity to legalise it, the minister said while preparing the budget they did not have exact information as to how many of the people whitened their black money thus far.
“If we get good results by continuing this facility, it will be offered again. However, there are mixed opinions on this. While some are in favour of it, many are opposing it on the question of fairness. We will review the matter in a few more days and make a decision. There is more work to be done in this regard.”
Professor Shamsul Alam, member of the Planning Commission, said the government has taken risks by reducing taxes in various areas to encourage investment.
“It has given business opportunities to the private sector. If investment and production increase to the desired levels, additional revenue will be generated within the next three years. Therefore, the estimate of 32% investment to GDP ratio in the proposed budget is not excessive at all.”
Finance Secretary Abdur Rauf Talukder said the allocation made in the annual development programme (ADP) in the proposed budget is more than the target set in the Eighth Five-Year Plan so that additional employment opportunities can be created in these development activities.
He hoped that it would not take even five months to create job opportunities for those who have lost their jobs due to the coronavirus.
Rauf further said the incentive packages would continue to be implemented to address the economic impact of Covid-19. “The prime minister has informed us that more incentive packages would be announced if needed.”
Discussing use of bank loans to meet the budget deficit, Bangladesh Bank Governor Dr Fazle Kabir said the government has planned to take out Tk76,000 from the banking system next financial year. “But, the banking sector now has an excess liquidity of Tk2 lakh crore, of which Tk40,000 crore is in cash and the rest is invested in treasury bills and bonds.”
Finance Secretary Abdur Rauf Talukder said a crash programme will be taken up at the beginning of the forthcoming financial year to address the failure to implement budget and irregularities in purchases in the health sector.
“Health sector purchases are mainly done considering the supply side. We will try to bring it to the demand side. At the beginning of the next financial year, all the hospitals in the country will be assessed and the shortage of equipment will be identified and purchases will be made accordingly.”
There is a lack of skills in project management and procurement in the health sector, he said, adding a crash programme will be run to eliminate it in the next fiscal year.
Even though the proposed budget is 6% higher than that for the current fiscal, the allocation for the health sector has doubled, he said.
“Tk14,200 crore has been allocated for vaccination. More money will be allocated for this if needed. There will be no shortage of money in this regard.”
In his budget speech, the finance minister mentioned that about 2.5 million doses of Covid vaccines will be administered every month.
When told that it may take about four years to vaccinate all citizens, AHM Mustafa Kamal said the government is keen to vaccinate everyone as soon as possible. Therefore, if necessary, the rate of vaccination will be increased, he added.
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