Citizen’s Platform against new tax burden in FY22

Staff Correspondent

10 May, 2021 12:00 AM printer

Citizen’s Platform for SDGs, Bangladesh has proposed not imposing any new taxes or hiking tax rates in the upcoming budget to help stoke consumption that may help covid recovery.

Instead, it suggested increasing tax collection by improving administrative efficiencies and plugging loopholes and stopping tax evasion and unproductive tax exemptions and rebates, and black money. 

Venting frustration over low tax-GDP ration, it proposed increasing the ration incrementally by 0.5–1.0 percent of GDP annually, reaching at least 15 percent by the end of next 5 years.

 “Despite reinstating of some jobs, different types of unemployment are still high and inequality has increased while consumption has fallen amid the pandemic,” the platform’s convenor Dr Debapriya Bhattacharya said in an online briefing.

 “So, I want to put stress on mid-term recovery plan through the budget. I had also come up with similar proposal earlier, but that only drew flak,” he added.

The next budget must focus on four key areas like stoking consumption, investment, government spending and net exports as an immediate recovery plan, he stressed.  

He proposed for GDP’s 0.5 percent cash transfer food support to people hit hard by the pandemic.

 “Currentcircumstances demand special attention to consumption protection of the poor or low income people and employment promotion at MSME level,” Dr debapriya pointed out.

On expenditure side, Citizen’s platform expressed concern over slide in development expenditure with a spike in non-development expenditure.

It sough GDP’s 0.5 percent incremental annual allocation on health and education sector to raise their share of allocation to GDP’s 3.5 percent and 4.5 percent respectively in nest five years. 

The platform called for formulating a core budget with 2-3 years framework that will incorporate a robust recovery strategy, intregrating recovery efforts with structural transformation needs.

Targeted discretionary support to the “left behind” and “push behind” communities or citizens and use SDG as a framework for poverty frame and aligning with 8FYP (2021-25) is critically important, it said.

It suggested prioritizing concessional foreign finance to improve ADP implementation as well as to keep budget deficit from increasing.

The government needs to create an integrated data base of potential recipients of government supports including social safety nets and to improve the quality of the public expenditures, involvement of stakeholders at different levels are required.

To have greater fiscal multiplier effect, it needs to push resources to those having a high marginal propensity to consume (e.g., poorer households) and a high marginal propensity to invest (e.g., small entrepreneurs).

Substantive cash transfer to disadvantaged communities or citizens, liquidity flow to MSME, domestic market-oriented manufacturing diversification, post-harvest mechanisation of agriculture, IT-platform based high value service provision etc are some strategic priorities for the FY2021-22 budget.

In Covid related Government support intervention, there were 14 fiscal support (including two food support) and this was less than 20.5 percent of total allocation. 11 hybrid support (subsidy to interest rate) amounting a little above 79.5 percent  of total allocation where 18 are new interventions and 7 were extension of the existing program.

Hybrid support in FY2020-21 includes additional Tk 100 billion in Working Capital loans to affected large industries and service sector. Some packages were announced in one fiscal year, but intesanded to disburse from following fiscal year fully or partly.

The estimated net fiscal support (Net fiscal support excludes fiscal support for agriculture sector and construction of home) is as low as 1.63 per cent and 15.54 per cent of total allocations in FY20 and FY21 respectively. In terms of share of GDP, they are 0.04 per cent and 0.19 per cent respectively.

Citizen’s platform thinks that covid-19 fiscal support was not only low in allocation, but also slower in delivery.

This overwhelming constraint cannot be addressed exclusively through strengthened administrative monitoring. This will need wide-ranging structural and institutional reforms.