The proposed budget for FY2019-20 lacks transparency in different areas, says the independent think tank
The proposed national budget for Fiscal Year 2019-20 will bring greater benefits to high-income people but only marginal benefits to poor and middle-income groups, says the Centre for Policy Dialogue (CPD).
Addressing a post-budget press conference yesterday, CPD Distinguished Fellow Dr Debapriya Bhattacharya said the proposed budget would favour people benefiting from economic misrule and it is a matter of grave concern.
The think-tank argued that the proposed budget did not set aside enough for the agriculture sector and compensatory assistance for farmers who incurred losses due to the low price of rice.
In the proposed budget, they kept the individual income tax rate unchanged and also proposed increasing the surcharge ceiling to Tk3 crore from the Tk2.5 crore proposed in the current budget.
Noting that the individual income tax rate has been kept unchanged in the proposed budget, he said: “If we analyze the revenue measures in the proposed budget, it has given much more benefits to well-off and upper income people.”
The growing middle class and lower middle class income groups would not benefit much from it as there aren't enough measures to ensure quality education and health services for them, said the veteran economist at the event held at Lakeshore Hotel in Dhaka’s Gulshan.
"The growing middle class are the driving force… If we cannot utilize them, it would be contradictory to Awami League's election manifesto," said the economist.
It will determine whether we are able to become an upper middle income country based on what we will do for middle-income people, he added.
He also said the beneficiaries of economic misrule will gain more from the proposed budget and that the CPD did not see any political or economic strategy in the budget for initiating needed changes.
This strategy was in the election manifesto and Seventh Five Year Plan, but the government did not allocate enough money, and was not spending for the wellbeing of the poor.
"Here is the concern that the government did not take it seriously, but we have taken it very seriously," he mentioned.
CPD also said the budget did not pay attention to the current pressures on the economy. "Though there is newness in the presentation, it does not reflect reality."
Subsidies given to the agriculture sector remained unutilized in some cases and there is a Tk5000 crore surplus with unused subsidy money in the gas and power sector. From this unused money, it would have been possible to give Tk9000 crore as incentives to farmers, which is what CPD recommended, said Debapriya.
Inequality to jeopardize growth rate
Talking about the rise in inequality, the CPD said it will be very difficult to retain the growth rate
The government is moving towards building an inclusive economy and society. But in a society where inequality rises, growth does not sustain and ultimately falls, said Debapriya.
“In the present context of growing inequality, it would be difficult to maintain a 7% to 8% GDP growth rate.”
Bangladesh was born of economic disparity and it continues to go in that direction so how can it reach its goal of inclusive development, said the economist.
Budget contradicts election manifesto
The think tank also said that allowing the whitening of black money is against the essence of the government's election pledges.
In the election manifesto, the government said it would build an inclusive society and the country would turn into a middle income country, but the finance minister did not give any importance to implementation of the Seventh Five year Plan and has given no detailed work plan.
Black money needs to be defined
In the proposed budget, the government allowed investment of black money in economic zones (EZs) and high-tech parks with payment of a 10% tax on the invested amount, which needs to be clarified.
“It is time to differentiate between undisclosed money and illegally earned money. If undisclosed money and illegal money are treated equally, it would go not only against the election manifesto but also against the constitution,” said Debapriya.
Budget lacks clarity and direction
There have been a number of promises such as generating employment or increasing the number of taxpayers, which were made without any concrete time bound plan and need to be clarified, said CPD.
In the proposed budget, the government said it would create one crore new tax payers and employment for over three crore people, but they did not specify where and when it would be done, said Debapriya.
Promises demand credibility, and for credibility you need strong and detailed plans on how to attain the goals, he added.
The CPD sought greater transparency in the budget allocation and expenditure framework.
In addition, the think-tank also noted that there are inconsistencies between the data presented in the budget document and that of different government agencies.
In the case of tax deduction at source on contractor and supplier bills, the first slab was mentioned to be “up to Tk25 lakh” in the budget speech. However, in the National Board of Revenue documents the same first slab was mentioned to be “up to Tk 15 lakh,” said Debapriya.
The CPD said tax-free dividend income for investors will bring benefits to small investors, but it would not establish good governance, much needed for stability in the stock market.
In the proposed budget, the government has allocated about 72% of the total budget to five sectors including, transport, power, physical infrastructure, education, and science and technology, which indicates a kind of imbalance in the budget in terms of allocation.
CPD Research Director, Dr Khondaker Golam Moazzem, made the welcome remarks while CPD Senior Research Fellow Towfiqul Islam Khan, and Dialogue and Communication Director Anisatul Fatema Yousuf, among others, were present at the press conference.