Revenue boost critical to Muhith's jumbo budget
Chief Economics Correspondent, bdnews24.com
Published: 2015-06-04 23:12:30.0 BdST Updated: 2015-06-05 02:35:38.0 BdST
Finance Minister AMA Muhith placed a Tk 2.95 trillion annual budget for 2015-16 fiscal on Thursday, aiming for a quantum jump in revenue collections by widening the tax net and levying taxes on a whole new range like online trading and mobile phone use.
The budget projects a 7 percent GDP growth and seeks to keep inflation below 6.2 percent.
But the 83-year-old minister surprised many by not targeting tobacco products that face ever increasing taxation not only in developed countries but also in neighbouring India and China.
As a result, cigarette and bidis will not cost more, and chocolates and biscuits will cost less.
Muhith raised the exemption limit for income taxpayers to Tk 250,000 but set out to widen the tax net and gain revenue through better compliance.
Different kinds of garments like shirts and pyjamas will also cost less but garment exports will be taxed more at source.
Using a mobile phone will be more expensive, if not buying one, because of taxes on RIM and SIM cards.
Online trading will be taxed at source, so buying anything online will be costlier than before.
Imported foods and vehicles will cost more, as would services in beauty parlours.
Muhith's revenue target of Tk 2.08 trillion is ambitious. The NBR will collect more than Tk 1.82 trillion, of which 60 percent will come from VAT alone.
He targets 3 million people in the tax net within the term of his government against the mere 1.1 million taxpayers who now pay up.
He has raised the exemption limit of income tax to Tk 250,000 per annum but hopes to boost revenues by bringing more people in the tax net and emphasising compliance.
But the corporate tax rates have been slashed to cheer up the industry. The tax ceiling on dividend income has been raised to buoy up the stock market.
The defence budget has been slashed marginally in percentage but not in gross terms – down to 6.2 percent of the total outlay against 6.6 percent in the 2014-15 budget.
"That won’t affect modernisation of the forces in terms of weaponry or training," Muhith assured Parliament as he placed the budget proposals.
He has also sought to expand the social safety net, covering more old age, disabled and disadvantaged women by government subsistence allowances.
The finance minister has doubled the allocation for augmenting power generation.
Ahsan H Mansur, director of Policy Research Institute (PRI), feels the budget will only work if it succeeds in generating a lot of investment.
"The revenue targets and the 7 percent GDP growth projection will only materialise if there is huge investment," Mansur said,
"And only if that happens will the high social sector spending be possible," said Mansur.
The country's largest opposition party, BNP, has refused an official reaction, saying this is the budget of an “illegitimate government".
But former BNP commerce minister Amir Khosru Mahmud Chowdhury has expressed doubts about this budget and whether it will be possible to achieve its targets.
Chowdhury said the government's "corruption and mismanagement” will make it impossible to get the economy out of the woods.
But Muhith appeared to be in high spirits.
His GDP growth projection at 7 percent is largely based on the hope that oil prices will remain low and stable.
"My budget will aim to breach the 6 percent growth barrier, we will achieve more," Muhith said.
He welcomed all to be a part of the national growth story, urging them to give up 'senseless political strife'.
His budget secure in a black briefcase, Muhith entered Parliament with Prime Minister Sheikh Hasina at 3:15pm and started to present the budget proposals after a nod from Speaker Shirin Sharmin Chaudhury.
As he discussed the revenue and expenditure proposals of the 2015-16 budget, Muhith vowed to take Bangladesh into the league of middle-income nations much before the target date of 2021.
More than Tk 1.82 trillion of the revenue income will come from taxes. Of them, the NBR will have to earn more than Tk 1.76 trillion.
The government hopes to earn over Tk 2.14 trillion in revenue income and foreign aid.
For the self-governed institutions, there is a total expenditure of Tk 2.95 trillion. The non-development expenditure is Tk 1.845 trillion while the development expenditure is Tk 1.025 trillion.
This time, the Annual Development Programme is Tk 970 billion.
Minister Muhith has depended on domestic and foreign loan to make up the Tk 866.57 billion deficit.
He hopes the government will be able to borrow Tk 565.23 billion from domestic sources and get Tk 243.34 billion in foreign borrowing.
The government intends to borrow as much as Tk 385.23 billion from local banks and Tk 180 billion from non-banking sector like national savings schemes.
Muhith hopes the rest, Tk 58 billion, will come as foreign grants.
In his speech, he said he wanted to purge Bangladesh of extreme poverty before the golden jubilee.
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