Next budget must deal with Covid-posed insecurities: Zahid Hussain

Ibrahim Hossain Ovi

The spirit of the budget for the fiscal year 2021-22 should be dealing with insecurities in issues relating to health and economy posed by the Covid-19 pandemic, said Zahid Hussain, former lead economist at World Bank, Bangladesh while talking to The Business Post’s Ibrahim Hossain Ovi. He is of the opinion that attracting investment and protecting employment are going to be key issues for the government for the upcoming budget. Here are the excerpts:

What should be the focus of the budget for FY22?

The government prepares budget on a spirit every year in order to accelerate economic growth of the country. This year the spirit should be security as there are economic and health related insecurities posed by the Covid-19 pandemic. Meanwhile, the legacy of the previous budgets should continue to address key economic issues.

How to address economic and health insecurities?

In addressing the issue of health insecurity, the government must launch a guideline to bring the majority of the population under vaccination programme. While the World Bank and the Asian Development are continuing funding, the vaccination programme should be top priority for the government in bringing normalcy in economy.

A good number of people became poor due to the pandemic losing jobs and people’s income declined. To feed this new poor section of the society, allocation to safety net programmes must be improved.

Cash transfer to this end is the best solution. To ensure proper disbursement, transfers should be digitised.

On top of that, in selecting people for cash support, the government has to involve local rights groups and non-governmental organisations as they have a network that reaches a large number of people.

It is very important for the government to take measures so that issues relating to economic insecurities do not aggravate and persist at present level.

What should the tax system be in the next budget?

There are multiple rates of corporate taxes in different sectors which need to be unified.

Existing rates are higher compared to our competing countries, which can be reconsidered for the sake of investments and employment. The existing rate could be cut by five per cent in the next three years.

How can the government retain the amount of revenue being collected after reducing tax rates?

Tax to GDP ratio in the country is currently not in good shape. Tax revenue collection is also below the target. If tax is reduced it is bound to hurt revenue collection more.

On the other hand, there is no scope for tax waiver in any sector. The government has to stop leakage and evasion of taxes. It also must remove anomalies and bring reforms in the system.

To reduce the cost of tax payment and improve collection, the government should digitise the tax collection method.

How to boost investment in the country?

In boosting investors' confidence, the government has to bring most of the population under vaccination programme. For ensuring supply of vaccines, the government must set a target to buy doses from multiple sources as we have already faced problems in this regard due to reliance on a single source.

On the other hand, if corporate tax rate is simplified and reduced, it will help attract investment from both home and abroad.

Most importantly the government must undertake regulatory reforms to improve business climate in the country. If we succeed in completing ongoing reforms, it will help in bringing more investment in the country.