Life to become costlier, economic recovery slow

For the first time in the history of Bangladesh, a 2 percent tax has been imposed on local supplies of everyday essentials such as rice, pulses, oil and corns. 

Besides, rates of tax and supplementary duty have been raised on everyday expenses, including mobile phone usage, car usage, furniture purchase, airfare and depositing money in banks.

Although it was highly expected that the budget for the next fiscal year will reduce the tax burden on common people, who are reeling under the economic shock induced by the coronavirus pandemic, the reality is completely the opposite.

Experts feel the imposition of high supplementary and excise duties, apart from taxes on various everyday essentials, will make the everyday life of the people costlier.

Those at the lower income bracket will be the worst affected and will lose their capacity to spend more for healthcare, food and education, they continued.  This will lead to a further rise in the already increasing poverty rate as the poor are already vulnerable.

Millions of them have been out of work and so have lost source of earnings. Many will remain jobless or have to live lives on less payment.

As a result, economic recovery from the coronavirus pandemic will be somewhat impossible, they added.  

Economists said 95 percent of people have seen their income reduced over the past three months during the pandemic, while the poverty rate has jumped to over 40 percent from 19 percent. There has been a decline in people's tendency in purchasing goods other than everyday essentials.

Against such a backdrop, an increase in people's cost of living is feared to have an adverse impact on the manufacturing sector and employment.

Ahsan H Mansur, executive director of Policy Research Institute, said the budget should have been a recovery-based one during the current coronavirus pandemic.  

"Ensuring money flow into the market should have been the highest priority at this moment," he continued, "but the entire economic cycle has been put on hold by increasing tax rates."

Although the proposed budget has given some relief to marginal taxpayers and corporate taxpayers by raising the tax exemption threshold and slashing corporate tax and has offered some opportunities in the manufacturing sector, economists have deemed these measures as being far from adequate in the current economic perspective.

Dr Selim Raihan, executive director of South Asian Network on Economic Modeling (SANEM), told The Business Standard that there is a big question as to whether economic activities will get back to their full pace.

Except for the incentive packages, there is no announcement in the budget for normalising the employment sector and people's livelihood by combating the coronavirus crisis.

An analysis of the budget speech of the finance minister and the finance bill reveal that the structuring of the tax rates may result in a price hike of commodities such as rice, wheat, potatoes, onions, garlic, peas, chickpeas, lentils, ginger, turmeric, dried chili, pulses, maize, coarse flour, flour, salt, edible oil, sugar, black pepper, cinnamon, cardamom, clove, date, cassia leaf, computer or computer accessories, jute, cotton, yarn and all kinds of fruits.

A 2 percent tax is going to be imposed on sales of these products through local credit of LC or any financial agreement.

Besides, taxes have been imposed on the import of some products, including onion, honey, and salt.

Even though the government has relaxed import duties of sugar, garlic, raw materials for the poultry industry, and agro machineries, Golam Rahman, chairman of the Consumers' Association of Bangladesh, feels this relaxation is insignificant when compared to the imposition of fresh taxes.

This budget has failed to relieve the general people who have lost earnings or their sources of income during the pandemic, he said, adding that this budget has placed greater burdens on the people instead of giving them relief.

The proposed budget also plans to increase the supplementary duty from 10 percent to 15 percent on the services provided through mobile phone SIM/RIM card.

The call rate, SMS charge and price of internet packs will increase further because of the increased supplementary duty.

With this, subscribers will get services worth Tk75.3 after recharging Tk100. The rest of the Tk24.97 will go to the government treasury, up from Tk22 at present.

Analysts and telecom service providing companies have been stressing that an increase in taxes on mobile services will put common people under further stress.

Meanwhile, supplementary duties on service fees collected by the BRTA, including registration of cars, have been raised to 15 percent from 10 percent and the annual tax on a car or microbus has been hiked by 50-57 percent, which will lead to an increase in people's transport costs.

Besides, VAT has been imposed on tickets for air-conditioned launches, while supplementary duty on fares of chartered planes and helicopters has been raised from 25 percent to 30 percent.

Supplementary duties on cosmetic items have been raised to 10 percent from 5 percent.

A 10 percent supplementary duty has been imposed on ceramic sinks and basins, while taxes on all types of bidi and cigarettes have also been raised.