Theoretically, budget means “a quantitative expression of management goal and objectives and a means of monitoring progress toward their achievement”. In the last few years, we have seen the government presented highly ambitious budgets with huge deficits, which never looked achievable. Those familiar with financial policy matters know it well that a budget deficit in excess of 25% can never be achieved.These days, the budget, in public imagination and in policy declarations, has become a show of all about taxes, rather than being a roadmap for prudent fiscal management of the exchequer. The first budget of the country, after the Liberation War, was of Tk. 786 crores. In 2017-2018, it stands at a whopping Tk. 400,266 crores. The budget pattern has to be realistic in future years; otherwise, it will always be perceived by the general population as an announcement of the government’s tax card.Out of every Tk. 100 paid as taxes, the significant areas of disbursement are—Tk. 22.00 towards paying government salaries, Tk. 9.40 towards retired government employees’ pension, Tk. 16.90 towards interest on loan, Tk. 16.90 to aid or grants, Tk. 10.00 for products and services, Tk. 7.90 for subsidies and incentives, Tk. 5.80 as underdevelopment-related investment, Tk. 4.40 for miscellaneous purposes, and Tk. 1.40 for unexpected expenses. Here, we can see that the poorly planned salary hike for government employees had significant impact on the budget boom.After the hike in salaries for government employees, has there been any change in their mindset? Has there been any increase in productivity? Has bureaucratic hassles lessened a bit? Has there been any reduction in corruption? The answer to all these questions is a resounding “No”.Is it govts financial roadmap or tax card for a year?
The poorly planned salary hike for government employees had significant impact on the budget boom
Md. Shajjad Hossain, FCMA
Theoretically, budget means a quantitative expression of management goal and objectives and a means of monitoring progress toward their achievement. In the last few years, we have seen the government presented highly ambitious budgets with huge deficits, which never looked achievable. Those familiar with financial policy matters know it well that a budget deficit in excess of 25% can never be achieved.These days, the budget, in public imagination and in policy declarations, has become a show of all about taxes, rather than being a roadmap for prudent fiscal management of the exchequer. The first budget of the country, after the Liberation War, was of Tk. 786 crores. In 2017-2018, it stands at a whopping Tk. 400,266 crores. The budget pattern has to be realistic in future years; otherwise, it will always be perceived by the general population as an announcement of the governments tax card.Out of every Tk. 100 paid as taxes, the significant areas of disbursement areTk. 22.00 towards paying government salaries, Tk. 9.40 towards retired government employees pension, Tk. 16.90 towards interest on loan, Tk. 16.90 to aid or grants, Tk. 10.00 for products and services, Tk. 7.90 for subsidies and incentives, Tk. 5.80 as underdevelopment-related investment, Tk. 4.40 for miscellaneous purposes, and Tk. 1.40 for unexpected expenses. Here, we can see that the poorly planned salary hike for government employees had significant impact on the budget boom.After the hike in salaries for government employees, has there been any change in their mindset? Has there been any increase in productivity? Has bureaucratic hassles lessened a bit? Has there been any reduction in corruption? The answer to all these questions is a resounding No.
The salary hike play has only contributed to inflation and helped in pacifying the government, may be for using term. In my opinion, people will be satisfied if the government puts more focus on socio-economic aspects like lowering the costs of basic medical treatment and basic education. We should think how the elderly and the infirm can receive support from the government and the society, in general. We should also think of introducing a pension scheme for all private-sector employees, so that they can expect a minimum level of pension that they can fall back upon in times of hardship.
In this regard, the government must be appreciated for the establishment of Freedom Fighters Benefit Scheme.
However, come of budgeted revenue goes to refill the governments bank capital. We need to think if this is the right way to distribute this fund? The government must develop a system to protect the central bank reserves and reduce bankruptcy among commercial banks. In order to do so, the government must take appropriate action against bankers and associated concerns.
People are expecting the exempted amount for individual tax slab will be at Tk 3 lakh instead of Tk 2.5 lakh. But there is no change in individual and corporate tax rate in this budget. In addition, the government is imposing increase to change in various slabs amount of excise duty on balance amount bank account. This excise duty will give negative impact: it can reduce the principal amount and people may feel discouraged to save their money in bank. The most challenging areas of the budget are the effective implementation of the new Value-Added Tax and Supplementary Duty Act, 2012, which will take effect from July 1, 2017. There are 8.5 lakh merchants registered under VAT, but only 32,000 pay the tax. The new VAT Act prescribes online re-registration for merchants, who will be bound to submit their returns online. Under this Act, VAT will be applicable at a single and uniform rate of 15%, which will remain unchanged over the next three years. The government has increased utility priceslike that of gas and electricityagain, by introducing the 15% uniform VAT, instead of the existing 5% for such services. This uniform 15% VAT rate, applicable to all commodity prices, is surely going to impact the cost of living index. Therefore, the government should consider lowering the VAT rate to 10%, for the next three years. Another major challenge will be the adoption of the online VAT system, by the business community. We should avoid the tax on tax concept by finding out new services that can be brought under the tax net, such as the digital addressable system or direct-to-home (DTH) television services. There are almost three crore television sets in Bangladesh and most of these are connected with unregulated cable TV networks. The cable TV operators usually collect, on an average, Tk. 250-300 per month, against each connection. This leads under reporting and subsequent tax leakages. On the other hand, DTH services are transparent and can help close tax leakages in this sector, untangle the cityscapes from cable TV wires, and generate more revenue for and from network operators.
The writer is Chief Financial Officer, Beximco Media. Email:[email protected]
