The Centre for Policy Dialogue (CPD) yesterday said measures to tackle inflation in the proposed national budget for the fiscal year 2022-23 were insufficient despite the government’s repeated references to addressing the issue.
Furthermore, the ambitious move to legalize the laundering of money from overseas would only encourage those who took money out of the country illegally, they opined.
According to the think tank, which presented its annual post-budget reaction the day after the proposal was raised in parliament, there is a lack of transparency in the data published in this year's budget documents.
CPD Executive Director Dr Fahmida Khatun said: “We have seen the word ‘inflation’ come up in the budget many times, but the initiatives of the finance minister on inflation are not enough. In the tax structure, the proposal to withdraw tax on daily necessities is not enough, as tax remains on many products.
“There is no tax exemption on many daily necessities in the budget, except wheat. The tax-free income limit has not been increased amid this time of inflation, and neither have subsidies and social security.”
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In its presentation, the CPD also said inflation was assumed to stay stable at 5.6% in FY23.
"But we have seen, according to government calculations, that inflationary trends exhibited an upward tendency in the closing months of the current FY22. It was 5.8% in April 2022. Both food and non-food inflation appear to have been increasing to 5.5% and 6.3% this April, respectively," said the CPD executive director.
Asked about the estimated average inflation rate of the next fiscal year, Khatun said that 5.6% had been estimated, but this had no connection with reality.
The government's information did not match the price of essential commodities in the market. The finance minister might think that current crises, including the Russia-Ukraine war and the Covid-19 pandemic, would end soon but he did not show the way with any magic wand to a reduction of inflation, she further said.
Regarding the lack of transparency, she said that budget documents had failed to publish data on how much funds were disbursed through the financial support measures launched in response to the Covid-19 pandemic.
Such a lack of transparency and accountability threatened to reduce the effectiveness of the government’s pandemic response. Disaggregated data on the implementation status of all liquidity support packages should be published on a monthly basis, said the CPD official.
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Additionally, the CPD had previously suggested reducing tax on 29 daily commodities which were burdening the common people.
The organization lauded the government for reducing taxes on items like sugar, rice, puffed rice, wheat, sugarcane, and more, terming the move as a positive step.
Encourages launderers, frustrates taxpayers
About offering amnesty to money launderers by allowing them to legalize their money from overseas, Fahmida Khatun said those who had amassed wealth illegally by taking bank loans and never repaying them were being given facilities.
"This is extremely unethical. This is an attempt to discourage honest taxpayers and demoralize them,” she observed.
“On the other hand, this initiative encourages those who take money out of the country illegally,” she added.
However, no money would be returned from abroad even after this initiative, the CPD official predicted.
Finance Minister AHM Mustafa Kamal, during his budget proposal on Thursday, said that the money would be legalized with a 7% tax.
In this regard, Prof Mustafizur Rahman, distinguished fellow at the CPD, said previous budgets used to allow provisions for whitening black money, which very few took up.
This time, laundered money is being legalized. It is unacceptable on three grounds: political, economic and moral, he opined.
Citing the example of notorious scammer PK Halder, he asked: “What can be done, after this announcement, if someone actually returns his illegally amassed wealth back, and pays the taxes?”
However, he thinks that this opportunity will not be very useful. Instead, there will be a tendency for more money to be laundered in the future.
With another national election looming, no one will bring money back to the country, he added.
Towfiqul Islam Khan, senior research fellow at CPD, said this budget facilitates those who laundered money abroad, but there was nothing for low-income people of the country.
He also thought that the middle class had been neglected the most in the budget.
The budget proposal did not include anything to prevent money laundering and tax evasion, he added.
If tax management is not strengthened and automated, then the revenue target will not be achieved, said Fahmida Khatun.
Quoting Finance Minister Mustafa Kamal, she said that there were 45 million middle-income people in the country who did not pay taxes.
So, if the tax management was not automated or modernized with the help of skilled manpower, temporary measures could increase revenue but they would not be able to achieve the target of bringing the greater population under taxation, she also said.
More creativity was needed in the budget. There was a need to keep the allocation in the authority sector flexible, the CPD further said.
Complaining that the issue of social security was not given importance, the think tank said that the budget has retained the opportunity to invest undisclosed income. There is no chance to support the issue.
Commenting on the steps taken to address the overall challenge, the CPD said that it was important to coordinate the steps taken in the budget to meet the challenges.
