• Thursday, Aug 06, 2020
  • Last Update : 04:29 pm

Winners and losers in the budget?

  • Published at 09:49 pm June 12th, 2020
budget bangladesh

'It seems like the [Covid-19] crisis, which is expected to continue for months, will squeeze people like us more and more'

Ekhlas Mia, who used to work as an assistant on a city bus, spent most of his time for over two months at home as public transports were banned during the lockdown to reduce the transmission of Covid-19. During this time, he constantly monitored different TV channels while sitting at a tea stall just outside his rented tin-shed house at Kalyanpur slum, looking for signs of help from the government.

When the proposed budget for the 2020-21 fiscal year was revealed, Ekhlas became very upset as he saw nothing for the newly poor like himself.

“It seems like the [Covid-19] crisis, which is expected to continue for months, will squeeze people like us more and more,” said a visibly disenchanted Ekhlas, who has neither earned any money nor received any assistance since the lockdown began.

Tea stall vendor Abdul Jalil also said he has concerns with the budget as his income saw a massive reduction during the two months of lockdown. He has been able to earn a little bit since the lockdown was lifted at the beginning of the month. 

In a BRAC survey released last week, around 67% of the respondents said they had become newly poor as a result of job losses during the coronavirus pandemic. 

A total of 95% of households experienced income reduction during the initial days of the Covid-19 outbreak, but the number declined to 76% in April and May, the survey said. 

In addition, the income of 51% of households was reduced to almost zero, while 62% of wage earners experienced job losses and 28% became economically inactive, it finds. 

Although the budget highlighted many initiatives to fight Covid-19, it did not mention any program for the urban poor who have slipped into poverty during general holidays from March 26 to May 30. 

The government has proposed a Tk95,574 crore allocation, 16.83% of the budget, for social safety net programs to increase coverage of allowance programs including old age allowance, allowance for widows and women deserted by their husbands, and for insolvent persons with disabilities. However, nothing was mentioned for the newly poor. 

Economists said life would become difficult with the imposition of duties and VAT on many items used in everyday life, as it would reduce the purchasing capacity of people, and will squeeze those who witnessed income reductions in the last three months. 

Dr Rumana Huque, an economics professor at Dhaka University, said the government has announced some incentives to help farmers and garment workers, but the budget has no mention of measures to help those who have fallen below the poverty line due to the ongoing pandemic. 

How will the budget affect you?

One part of the budget that will provide some relief for people from all income classes is the expansion of the tax-free income facilities. For the first time in five years, the government has raised the tax-free income threshold by 50,000 in each of the criteria, to ease the financial burden due to the Covid-19 pandemic. 

However, some daily essentials are likely to get pricier as taxes have been imposed on the imports of onion and salt. On the other hand, duties on sugar and garlic have been relaxed.

A 5% hike in the supplementary duty on mobile phone services – voice, SMS and data - has also been proposed.

As of March, there were 165,300,000 biometric verified subscriptions in Bangladesh, according to data from the Bangladesh Telecommunications Regulatory Commission (BTRC). 

Personal vehicles are also set to become pricier, as the supplementary duty on service fees collected by the Bangladesh Road Transport Authority (BRTA) have been raised by 5% and annual tax on cars and microbuses have been hiked by 50%-57%. 

Use of routers, now common in almost all houses, will also be costlier because of a fresh 5% VAT hike proposed in the budget. 

Budgetary measures will also make furniture purchased from showrooms, travelling via air-conditioned launches, locally made cosmetics, and ceramic sinks and basins more expensive. 

However, sanitary napkins and diapers are likely to become cheaper as cuts on the customs duty on the import of raw materials for these items have been proposed. 

Gold and locally made fridges, air-conditioners, cell phones, motorbikes, plastic goods and LP gas cylinders will also become cheaper because of cuts in VAT and duties. 

Travelling via chartered aircraft and helicopters, and imported processed chicken meat is set to become costlier according to the budgetary provisions. 

Meanwhile, excise duties on bank accounts that hold over Tk10 lakh will be hiked, affecting many depositors. 

Although excise duty rates will remain unchanged for bank accounts with a balance of less than Tk10 lakh at any time during a year, it has been hiked by Tk500 for balance between Tk10 lakh to below Tk1 crore, and Tk3000 for account balance between Tk1 crore to below Tk5 crore. 

For accounts with a balance over Tk5 crore, the duty is set to be raised to Tk40,000 from Tk25,000, a 60% hike. 

Until December 31 last year, there were 106,500,000 bank accounts with a total balance of Tk12.14 lakh crore. 

No measures for Covid-19 hit people a surprise

Ghulam Rahman, chairman of the Consumers Association of Bangladesh (CAB), said the tax-free income expansion will help people get some relief, but the lack of measures for people who lost earnings during the Covid-19 pandemic is surprising. 

“This budget has placed greater burdens on the people instead of giving them relief,” he said. 

Eminent economist Prof Dr Abul Barkat claimed that nearly 36 million people lost their jobs in the 66 days of countrywide shutdown. Of them, 30% were poor before the shutdown, but now all of them are poor.

Dr Barkat, also president of Bangladesh Economic Association (BEA), said this budget does not at all help people who are in need.

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