No strong message for reform

Crisis is the best time to pursue reforms as it reinforces the necessity for urgent changes to improve things and help the government generate public support to overcome resistance from within the system.

Financial analysts hoped that the new budget, placed in the toughest time, would have some strong commitment to initiate new reforms and carry out the previous ones to help the economy overcome the shocks and set for a recovery path gradually.

They have nothing much to be happy about as the finance minister in his budget speech on Thursday repeated some commitments made in his last year's speech.  

One of the key areas of reform is the revenue sector, with analysts calling for a strong message for drastic administrative reforms to plug theft and bribery in all three fronts—income tax, customs and value added tax.

A big push is needed in the revenue sector as the government has set a higher revenue income target, dubbed by many as unrealistic, to meet higher demand for money to rebuild pandemic-ravaged economy and life.

All economic activities gathered a remarkable pace in the first eight months of the fiscal year, before being hit by the Covid-19 pandemic. But unfortunately, all calculations about the global economy have been 3turned upside down under the impact of the Covid-19 global pandemic, the finance minister said in the budget speech.

Unlike the previous budget full of rosy projections and successes, he was quick to his point: This is not the time to showcase our achievements. Rather it is time to steer the nation ahead, having our people at our side and effectively tackling the crisis arising from the deadly attack of coronavirus through our pragmatic and efficient plans.

To achieve full economic recovery, the finance minister has spoken about four main strategies: discourage luxury expenditures and prioritize government spending that creates job, increasing public spending, subsidized loan for affected businesses.

"Our third strategy is to expand the coverage of the government's social safety net programmes to protect the extreme poor and low paid workers of the informal sector from the sudden loss of their source of earning due to pandemic," he said.

The government's earlier programme of direct cash transfers of Tk2,500 each for 50 lakh selected families nationwide to help them offset sudden job loss has been incorporated in the budget without any roadmap to remove the loopholes and disgitise the listing process.

Every taka counts in times of hardship, so economists have been stressing the need for quality spending in selected projects and involve non-actor actors in project work monitoring.

No such hint is the budget, which just copied a paragraph from previous year's budget speech: To simplify the development project fund release process, Project Directors (PDs) have been given the full authority in the current fiscal year to utilise project funds without seeking approval from any authority.

'Eliminating Corruption' paragraph has also been repeated from the previous budget speech, reiterating the government's "zero tolerance approach against corruption" and modernizing the Anti-Corruption Commission.

Drastic reforms are not possible at this time of pandemic, but bringing in more taxable people in dragnet, better enforcement of VAT law and rationalizing of exemptions can help NBR raise its earnings to support rising demand for money.

Administrative functioning of the revenue authority could be reformed to bring in dynamism in customs and VAT procedures through automation of registration and assessment.

These were the views of experts at a discussion arranged by The Business Standard, little reflection was there in the budget speech.

The finance minister also highlighted the need for reform with little progress made from last year's position.

"Initiatives have been taken to make the Income tax, VAT and Customs departments fully automated and digital. In addition, the e-payment system has been introduced in the Income tax, VAT and Customs departments to facilitate tax payment," he said.

VAT Online, installing electronic fiscal devices (EFD) in shops to collect VAT, modernising customs service, setting modern scanners at ports, National Single Window (NSW), 'one stop service for export' are among the things heard last year also.

A tax rebate of Tk 2000 has been proposed for all taxpayers who will file their income tax returns online for the first time in the new budget, which gives highest priority to the digital transformation of the Income Tax Department.

There was a call for reducing power sector projects given the burden on the government to pay taka in thousand crore as capacity charge due to lower demand from industries. But big projects are still incorporated in the next year too.  

Currently, 48 power plants and the signing of agreements for construction of 12 power plants are under process, the finance minister said. The tendering processes for 6 power plants is underway. We have also taken up plans to construct 16 more power plants with a generation capacity of 19 thousand 100 megawatts in the near future, he added.

Small and medium industries, which provide the biggest jobs in the informal sector, are worst hit by the shutdown enforced to slow the spread of Covid-19. But little has been said to protect them from any such vulnerabilities like losing their jobs overnight.

Nothing is there to protect the businesses and jobs informal sector, or giving small businesses a bigger access to banks. Rather a warning is there for bringing small and medium enterprises into VAT coverage, which will hit both entrepreneurs of small businesses and consumers of their products.

The budget looks as if it is done in a normal situation to sustain growth. Nothing is said about protecting 'new poor' and revamping the social safety net for a wider section of people hidden by the shutdown and pandemic, said Dr Monzur Hossain, senior research fellow of Bangladesh Institute of Development Studies (BIDS).

Public sector reform and slashing unnecessary expenditure to keep money aside for emergency responses are missing in the proposed new budget, he said.

Dr Muhammad Abdul Mazid also did find little to call it a budget prepared in a very crucial time. "The word 'Covid-19' has been just mentioned several times in the speech. That's all. As if nothing has happened and we'll still achieve high growth, earn more revenue."

Revenue reform initiatives were mentioned in the speech, but without any action plan to get those done, said the former NBR chief.