Centre for Policy Dialogue (CPD) suggests for an expansionary budget for FY22 to accommodate additional public spending needed for rescuing people as well as economic from the corona crisis.
With potential revenue fall, the government should go for borrowing from local banks or less costly foreign sources instead of savings certificates to meet the budget deficit along with containing inflationary pressure, it also suggested.To address the revenue shortfall in an equitable manner, it also called for reinstating individual income tax rate for wealthy people to 30 percent from the curtailed rate of 25 percent.
The suggestions came up at online media briefing on CPD’s Recommendations for the National Budget FY2021-22 on Thursday.
They (CPD) said the national budget for 2021-22 should highlight several areas including ensuring better health facilities for Covid patients and enhancing social safety net programmes for poor, new poor and marginalised people.
Besides, raising allocation for employment-enhancing infrastructure development projects and supporting agriculture, SMEs and export-oriented industries for their recovery and thereby keeping the existing jobs should be emphasised in the upcoming budget.
CPD Senior Research Fellow Towfiqul Islam Khan said the FY22 budget will need to address the weak performance of FY21 budget implementation, the persistence of adverse impacts of the first wave of Covid-19, continuing stagnation in private investment, the second wave of the Covid-19 pandemic and failure of the external sector to pick-up as well the medium-term fiscal reform issues with a view to making a recovery sustainable.
"The budget for FY22 needs to give equal importance to receiving funding opportunities and ensuring proper use of the funds. Besides, the revenue mobilisation strategy should be designed considering realistic manner, readjustments in tax provisions, enforcement of tax measures and curbing tax evasion. And implementation of medium-term reform plans should receive high priority," he added.Towfiqul informed as the country is passing through the second wave of the pandemic, the policymakers, once again are posed with the challenge of maintaining a balance between the lives and livelihoods.
Reduction of the corporate income tax rate from 35 percent to 32.5 percent for non-publicly traded companies and reduction of withholding tax from 1 percent to 0.5 percent on all types of export proceeds, including those of the RMG enterprises, introduced in the budget for FY21, are two provisions which may be continued in FY22, CPD said.
In addition, given the crisis inflicted by the COVID-19 pandemic, tax holiday facilities for the seven newly emerging manufacturing sectors earmarked in the FY21 budget, alongside the existing 26 sectors, should not be discontinued in the upcoming budget, it proposed.
In view of Bangladesh's LDC graduation in 2026, obligations and compliance requirements as a developing country should be identified, and gradually reforms in the taxation system should be put in place.
CPD would like to recommend that NBR introduces taxes for proxies for pollution, by tax region, in alignment with what was mentioned in the "Public Financial Management (PFM) Action Plan 2018-2023 to implement The PFM Reform Strategy 2016-2021" Towfiqul said.
He added that the provision of whitening black or undisclosed money facility through voluntary disclosure of undisclosed income should be discontinued in the budget for FY22.
CPD Distinguished Fellow Prof Mustafizur Rahman said during the first wave of the Covid-19, they stated poverty rate increased 35 percent from 20 percent due to the pandemic. So, each poor family should provide Tk 8,000 in two times in a year. "If we kept Tk 300 billion, then it was 1 percent of our GDP. Actually, cash transfer is suitable way to assist poor during the pandemic. We have to emphasis on revenue collection; otherwise how the government will assist people," the economist also said.
Mustafizur said reducing corruption and ensuring transparency in all sectors in the country are the most important issues during the disaster.
CPD Research Director Dr Khondaker Golam Moazzem said the government has taken different programmes to assist people those who are really appreciable.
"But, someone takes the assistance several times and someone does not get that. In this context, the government can support from different NGOs who are working with slum dwellers and other poor for proper distribution," he also said.