Chinmay Prasun Biswas

Tax is the most important part of government’s revenue earning. Position of a government mainly depends on revenue accumulation. For this reason, the main target of any fiscal policy is to collect higher amount of taxes but due to different reasons, this target falters in many cases.

As the expected amount of tax of the running financial year has not been collected yet, the government will have to make huge efforts to collect taxes in the next budget. In that case, more people are to be brought within the tax net.  According to economists, growth of economy has decreased in the current financial year. Uncontrolled rise of inflation, increasing risk of internal and external debt and low tax collection are the main reasons.

Due to decrease in growth tax concessions that were allowed in many sectors may be withdrawn in the next budget. To comply with the conditions of the IMF, it may happen that incentives granted to people will have to be withdrawn under many heads.

BBC Bangla, referring to a study of CPD, has reported that 64% of the participants in that survey have no expectation about upcoming budget. It has highlighted three points that people want --- decent employment, quality education and extended social security. Due to procedural limitations such types of surveys never represent majority of the people. It provides a glimpse but that is not also ignorable.

Former planning minister Abdul Mannan has said, "It can’t be said so easily that growth will go downwards. Growth has gone down a little but it is being termed as half. This gives a kind of wrong message to the people." As a member of the ruling party he will certainly say it but statistics show that situation is not so hopeful.

As informed by Bangladesh Bureau of Statistics, inflation rate was 9.81% in last March. Inflation in the country has been very high during last two years. It is now increasing uncontrollably and hitting people's standard of living.

Inflation adversely affects education and health of backward class people. In many places, child marriage is increasing. Income of people is not increasing whereas pressure of inflation is mounting. It is creating new poor. The coming budget should aim at including marginalised groups more in social safety and protection programmes.

Common people of Bangladesh say that their income is unable to keep pace with gradually increasing expenditure. Income of people is not increasing in parallel with high inflation.

As a result, standard of living of many people can even fall below the poverty line which is a big problem. Economists think that if inflation increases, price of raw material and cost of transportation will also increase. As a result, cost of production increases and in many cases ability to compete in production of goods also becomes weak.

According to the latest report of Economic Relations Department (ERD), expenses of paying interest on foreign debt in the first nine months of the current financial year has increased by around $ 890 million compared to the same period of the earlier year.

The report informs that during last nine months, a total of over $257 crore has been paid as interest and principal which was $173 crore during the same period in last year. This pressure to repay foreign loans comes at a time when the country has been facing a foreign exchange crisis for a few months.

At present the amount of government debt is 37% of GDP. Another 5% is private sector debt i.e. foreign and domestic debt amounts to almost 42% of GDP. This is putting pressure on exchange rate. Currency exchange rate is decreasing. According to economists, earlier it was said that Bangladesh has never defaulted in repaying debt. But now it appears that at least 5 billion dollars remain unpaid.

A major portion of the government's asset is being spent to repay debt, particularly when more than one-third of revenue expenditure is spent in repaying debt and paying salary and allowances, no significant portion remains left for development activities.

This loan has to be repaid in foreign currency. Price of goods also remains unpaid which is another problem. As a result, both taka and dollars become scarce which imparts a negative impact on investment.
As informed by Bangladesh Bureau of Statistics, the lowest growth i.e. 3.24% was in the second quarter of current financial year was in the industrial sector. Previously, at the same time, it was 10%.

According to economists, growth in the fiscal year 2021-22 was 7.10% that reduced to 5.78% in fiscal year 2022-23. From July to December of the current (2023-24) financial year growth further declined to 4.84%.

The government's growth target was 7.5%. To achieve this, growth should be 10% in the remaining months of present fiscal year which does not seem to be possible. As earning of government is decreasing, ability to spend is also shrinking. The tax-GDP ratio has not increased during last decade and a half. For this reason all-out efforts are to be made to collect tax in the upcoming budget.
______________________________________
The writer is a former Commissioner
of Taxes