What new in the proposed budget?

Every year we see that a new budget pops up with some increased figures compared to the previous one and it was not much different this time around. One notable exception that we may note is the FM’s proposal to give Advance Tax exemption to import aircraft by registered organisations.

Another new tax proposal looks pretty different. At present, bad debt that a bank or financial institution writes off is tax-exempt for all taxpayers. FM added, “I propose that bad debt that is written off for all types of taxpayers, except for individuals, is considered taxable income for the concerned loan defaulter.”

Bangladesh’s tax rates for companies are also higher than that of Vietnam, Thailand, Malaysia, China, Indonesia, Sri Lanka, and Pakistan. Vietnam and Thailand levy a 20 per cent tax on companies while the rate is 24 per cent in Malaysia and 25 per cent in Indonesia. The FM has announced a corporate tax for companies in line with previous budgets. According to media reports, the minister proposed a 2.5 percentage point cut that would put the rate at 27.5 per cent in the coming fiscal year.

The government previously cut the corporate tax rate by 2.5 percentage points in each of the two previous fiscal years, lowering it from 35 per cent to 30 per cent. Now it will drop to 27.5 per cent. The rate will apply to all companies unlisted on the share market, while the rate for listed companies will be lowered to 22.5 per cent and offer an incentive to one person company (OPC) by reducing the tax rate for OPCs from 25 per cent to 22.5 per cent. Moreover, the budget proposes a tax rate of 20 per cent in place of the existing 22.5 per cent for listed companies that issue shares worth more than 10 per cent of their paid-up capital through an initial public offering. The budget has another appreciable decision that all receipts, income and expenses, and investments over Tk 120,000 / annum must be transacted through the bank in order to avail of these reduced rates.

The health sector was not taken seriously in the budget. The overall budget has increased by 14.25 per cent, but the health budget rose by 12.62 per cent, meaning it has become smaller in relative terms. Last year, the allocation for health was 5.51per cent of the total budget, this time, it has been reduced to 5.43 per cent. The budget did not mention how people could handle the burgeoning out-of-pocket expenses. However, the positive side of this year’s budget is the proposal to abolish all kinds of tariffs on wheelchairs used by handicapped people and on Zinc-Air batteries used in the hearing aid machine of the hearing impaired people. This is the first time disabled people have been mentioned in the budget.

The FM is happy with the actions of mobile courts, and further action is being taken against the hoarders by commissioning mobile courts run by the Directorate of National Consumer Right Protection and District Administration to check the price of essentials.

The social safety net has been widened to some extent. Five million low-income households will get food assistance of 30 kg of rice each month at the rate of Tk15 per kilogramme. The assistance will be given in the lean seasons- September, October, and November, and March, and April, said Finance Minister, according to media reports. The government is distributing 500,000 tonnes of rice, and 509,000 tonnes of wheat flour in the current FY22, and this programme will continue in FY23.

In the FY2022-23 proposed budget Tk 1,13,576 crore has been allocated for the social safety net, which was Tk

1,07,614 crore in the previous budget. The new allocation for safety net is 16.75 per cent of the total budget and 2.55 per cent of the GDP.

The amount Tk 500 for elderly people, tea workers, transgenders, widows and gypsies will remain unchanged for the seventh consecutive fiscal year since 2015 when it was last elevated. Though the National Social Security Strategy (NSSS) has recommended per capita social protection allocation increase every year to keep pace with the inflation rate.

The good news is this time, the monthly allowance for disabled persons has been increased by Tk 100. It is now Tk759-Tk 850. In FY2021-2022, allowances are being provided to 20.08 lakh persons with disabilities at the monthly rate of Tk 750 and proposed to allocate Tk 2,429 crore in FY2022-2023 as disability allowances. The number of existing beneficiaries is planned to be increased by 3.57 lakh in FY2022-2023 to 23.65 lakh. At this time, the monthly allowance rate of existing allowances will be increased by Tk 100, from Tk 750 to Tk 850.

The finance minister also said that apart from the allowance programme, the government has also introduced a disability education stipend for students with disabilities. Under this programme in FY2021-2022, the number of beneficiaries was 1 lakh and the annual allocation was Tk 95.64 crore. Further, an allocation of Tk 1,820 crore has been made for the beneficiaries including an additional Tk 200 crore needed for the increased number of 20.08 lakh.

The prime minister has already inaugurated ‘Bangabandhu Disability Protection Insurance’ on the National Insurance Day under the Neuro-Developmental Disability Protection Trust to reduce the health and life risk of people with autism and neurodevelopmental disability in the country. As per the latest disability identification survey, the number of beneficiaries under the category of Insolvent Disabled Persons has increased by 2.8 lakh.

Similar to black money whitening programmes of the last many years, the government offered amnesty and subsidized tax for money launderers to get them laundered money back in the proposed budget of the FY2022-23. According to the proposed provision, no authority, including the income tax authority, will raise any question about the source of any asset located abroad if a taxpayer pays tax on such assets.

FM believes that “Money earned and assets acquired abroad” can be mainstreamed into our economy to create a flow of new funds and investments for economic activities. FM did not mention anything about money illegally and legally earned in Bangladesh and laundered abroad by different professionals. The minister proposed a 15 per cent tax on immovable property not repatriated to Bangladesh, 10 per cent on movable property not repatriated to Bangladesh, and 7 per cent on cash and cash equivalents repatriated to the country. This opportunity will be in force for the period starting from the first day of the new FY23 and will end on June 30, 2023. Civil society has already termed this move as an unethical privilege for persons who have committed the crime of laundering money abroad. The Foreign Exchange Regulation Act 1947 should be amended before extending such privileges to the country’s citizen.

The universal pension scheme will finally take off in July this year. All citizens aged between 18 and 50 will be entitled to the benefits of the move, the finance minister said in his budget speech, although the draft of the ‘Universal Pension Management Act, 2022’ is pending for approval by the Parliament. The draft law has many limitations. Many official formalities are pending to form a pension management authority. Implementing the universal pension scheme will bring many citizens from both the formal and informal sectors under the institutional social safety net. The plan is yet to be disclosed in detail since it needs very extensive care and efforts to materialize such a programme.

The writer is a legal economist and adviser, Bangladesh Competition Commission. He can be contacted at mssiddiqui2035@gmail.com