Economists and business leaders have called for focusing on social safety, health safety, and employment generation instead of GDP growth in the budget for the 2021-2022 fiscal year to come out of the social and economic fallout caused by the Covid-19 pandemic.
They also called for bringing reforms in the taxation system to generate more revenue through widening the tax net.
They came up with the remarks in a virtual dialogue on “Macro Economy: Expectation from National Budget 2021-22” jointly organised by the Institute of Chartered Accountants of Bangladesh and the Economic Reporters’ Forum on Tuesday.
“If we cannot vaccinate people, the impact of Covid-19 pandemic will return threatening the recovery. So, with special attention, the government has to allocate Tk 15,000 crore for vaccination with effective plan, said Ahsan H Mansur, executive director of Policy Research Institute.
The fund has to be made available for use from the day one of budget announcement, while a domestic vaccination system should be developed, said Mansur.
On the other hand, to feed the new poor caused by the pandemic, the government has to allocate Tk 1000 crore instead of occasional cash transfer, he added.
On top of that, for the revival of the SME sector, the government needs to announce a new stimulus package with effective disbursement, he said.
“With the devastating impact of the Covid-19 pandemic, the world is going through a turbulent situation. We have to think out of the box to overcome the present situation, said Abul Kasem Khan, former president of Dhaka Chamber of Commerce and Industry.
“In the budget for FY22, the government has to focus on keeping consumption vibrant through the continuation of stimulus packages offered in the current fiscal,” he said.
“There is an apprehension of falling domestic consumption as people’s income declines, which may linger the recovery. For keeping the production up, consumption has to be encouraged through reducing tax and providing policy support to SMEs,” said Kasem, also chairman of BUILD.
As the recovery will depend on the successful management of the health crisis, the government has to allocate enough fund for the health sector and involve the private sector in this segment, said Kasem.
He also called for rationalising the tax system and improve the investment climate to generate employment, which came to a halt due to the pandemic.
“Macroeconomic management, food securities and reducing the health safety risk should be the key focused areas in the next budget for FY22,” said Nazneen Ahmed, senior research fellow of Bangladesh Institute of Development Studies.
For health safety, there should be programmes such as awareness, vaccination and emergency response allocation with proper implementation mechanisms, she added.
All the discussants put stress on reforms of taxation systems and regulation to increase revenue mobilisation and to make it more innovative.
They also called for reforms in the capital market and bond market to make it a source of an investment fund and to attract large-scale investors.
Addressing as chief guest, economic affairs adviser to the prime minister Mashiur Rahman agreed with the suggestions of the participants to enhance budgetary allocation in the health sector and thus strengthen the ongoing vaccination campaign.
Stressing the need for carrying out necessary reforms in the financial sector and in the revenue sector, he said that reforms in the capital market and bond market was also necessary to attract large-scale investors.
Mashiur also stressed the need for boosting confidence among the businesses and investors, attracting more FDIs, ensuring skill development and sound basic education up to secondary level.
Cut Corporate Tax to lure investment
Both the economists and the business community called for reducing corporate tax to boost investment from domestic and foreign sources.
“The government is going to announce the national budget for FY22, when the second wave of Covid-19 hit and the country is struggling with a health crisis,” said ICAB president Mahmudul Hasan Khusru, who chaired the webinar.
The economy hit badly by the Covid-19 pandemic and performed below the expected level of normal time, said Khusru.
“Investment is crucial for employment generation. To attract Foreign Direct Investment, high corporate tax is an impediment and it causes low foreign investment, said Khusru.
“For attracting investment, we should concentrate on a rationalised corporate tax rate in the upcoming budget. We urge the government to reduce corporate tax by 2.5 per cent every year to lower it to 25 per cent by the next three years,” said DCCI president Rizwan Rahman.
“After graduation to a developing country, our business competitiveness will be in tough competition. So, it is high time to concentrate on the issues,” said Rizwan.
He also asked to set a target on widening the tax net instead of setting a revenue target as it is increasing the burden of existing taxpayers.
Naznin Ahmed strongly advocated for reducing the corporate tax rate.
Focus on Women Entrepreneurs
To empower women financially and help their business to grow by overcoming the pandemic impact, the participants called for making the budget women-friendly.
“Women have limited access to social and economic areas. Though the women budget was introduced in 2009 but it did not reflect the wellbeing of women,” said Maria Howlader, vice-president of ICAB.
“The government should make the budget more gender-sensitive. In the budget allocation, there is no clear information about detail allocation and its implementation,” said Maria.
Of the government stimulus packages, 94 per cent of the beneficiaries of loans under this package were male and only 6 per cent were female, she added.
As the pandemic has disproportionately affected women entrepreneurs, a separate stimulus package needs to be introduced in support of women entrepreneurs, said Maria.
She also called for waiving license renewal and registration fees and exempting Value Added Tax for the women entrepreneurs.
More allocation for education
Former adviser to a caretaker government Rasheda K Chowdhury said that the next year's budget should be a pandemic-focused one while the education sector should be brought under the stimulus package as the losses to this sector was huge and it was invisible.
“Education sector must not be less prioritised. The impact of Covid-19 is yet to be visible. If we fail to address the issues, the generation may be the worse victim of it,” she added.