June 19, 2021, 4:15 pm
Md. Mizanur Rahman ACS: With the theme “Priority on Lives and Livelihoods, tomorrow’s Bangladesh” Finance Minister AHM Mustafa Kamal has placed the national budget of TK 6,03,681 crore for the 2021-2022 financial year. This is the country’s 50th national budget and the 13th consecutive budget of the ruling Awami League government in the parliament. This proposed budget is 35,881 crore taka more than the budget size of the FY2020-21, which was 5,68,000 crore taka. This proposed budget has given special emphasis on Health, Agriculture, Social Safety Nets, Employment, Flood and Disaster Management and Food security apart from addressing the Covid-19 related issues.
The marginalized people of the country have got priority in this budget. This budget has proposed 2,25, 324 crore taka for the Annual Development Program and 3,78,357 crore taka has been allocated for the operation and other sectors. In the Annual Development Program, this budget has proposed to allocate 29.4% for human resources, 21.7% for agriculture, 12.1% for power and energy, 26.4% for communications and infrastructure, and 10.4% for other sectors.
In the FY2021-22, the government is expecting to achieve 7.2% GDP. Moreover the government is expecting to keep the inflation rate within 5.3%. The Government has fixed 3,89,000 crore taka as revenue target for the fiscal year 2021-2022 which is the 11. 3% of the country’s total GDP. Here 3,30,000 Crore taka will be collected through the National Board of Revenue. The budget deficit will be 2,14,681 crore taka which will be 6.2% of the total GDP. Last year, the rate was 6.1%. Here 1,01,228 crore taka will be collected from foreign sources and 1,13,452 crore taka will be collected from domestic sources. Here 76,452 crore taka will be raised from the banking and other non-banking financial institutions and 37,001 crore taka will be borrowed from the selling of Savings Certificates.
Here, it is seen that the government is relying on the banking sector this year also as like the previous years due to non-collection of expected amount of money from external sources and shortfall in the revenue collection. So if the government borrows extra loan from internal sources, especially from the banking sector, then definitely private investment will be hampered and there will be a liquidity crisis and inflation will also occur. Therefore, implementation of the budget will be difficult if the expected funds are not collected from revenue collection and external sources.
This budget has proposed BDT 1,07,614 crore for the Social Safety Net Programs. This amount is 3.11% of the total Gross Domestic Product (GDP). The budget has allocated BDT 1,920 crore for the Ministry of Liberation war affairs. This budget has increased the monthly remuneration of the freedom fighters to BDT 20,000 from the existing 12,000 to improve their socio-economic condition.
To boost the country’s capital market, the Finance Minister has proposed to reduce the corporate tax. This proposed budget has reduced the corporate tax of the listed companies from 25% to 22.5% and the non-listed companies from 32.5% to 30%. The reduction of corporate tax will play a significant role in making the capital market more vibrant and will encourage the listed companies to give more dividends for their shareholders.
To promote the “Made in Bangladesh Brand” a 10 years tax holiday incentive has been announced for the three-four wheeler makers in the next fiscal year subject to complying with certain conditions. The manufacturers of certain home and kitchen appliances as well as the light engineering products will also enjoy this tax holiday incentive. The announcement of the tax holiday is an initiative towards overcoming dependence on imports and will help the local products to get an entry in the international market. This initiative will play a significant role in enhancing investment and employment of the country as well as in making Bangladesh a self-sufficient country in the very near future.
The new budget has proposed special stimulus package for the IT industry to prepare the nation to face the challenges of the Fourth Industrial Revolution. In this regard certain IT Farms will get special Tax Holiday Incentive for 10 years complying necessary requirements. This tax holiday proposal is appreciating because it will bring more investment, create more entrepreneurs as well as will create more employment. It will help our local IT farms to be self-sufficiency by reducing dependency on the imports.
The Finance Minister has proposed to insert necessary provision to provide tax rebate amounting to 75% of the total salary paid to the third gender or 5% payable tax whichever is lower to the employees who will employee 10% or 100 transgender employees. This is also appreciable, because if it is applied properly then their standard of living will be developed to a great extent.
This proposed budget has kept the individual tax rate unchanged this year. Just to include the third gender in the taxation portfolio, the minimum tax free ceiling income will be 3.5 lac. The changes in the VAT and Supplementary duty laws and customs are very much appreciating. The proposed budget has reduced the Advance tax from 4% to 3% in case of the import of the raw materials. Moreover the service rendered to the foreign country staying from Bangladesh will be considered as an export, where VAT will be charged at zero rate. Again in case of international tender, the LC opened in the foreign country will be considered as a deemed export, earlier it was applicable only for the foreign countries. The proposed budget has made the provision compulsory to submit the annual financial statement by limited companies for the purpose of VAT audit.
The Finance Minister has proposed to increase the corporate tax of mobile financial service providers (MFS), which have already become popular in the country. The Finance Minister wants to collect more revenue from this sector by raising taxes. As a result, companies in this sector will have to pay more taxes than before. In this budget, the Finance Minister has proposed to increase the tax rate for MFS companies listed in the stock exchange from 32.5 per cent to 36.5 per cent. If not listed, the tax rate will be increased from 32.5 percent to 40 percent.
In this budget 71,951 crore taka has been allocated for the education sector. This budget has announced Tax holiday for the educational Institutions who will offer diploma degrees and Vocational trainings on agriculture, automobile, aircraft maintenance, food processing, footwear, glass, mining, mechanical, ship building, leather, refrigeration, ceramics, apparel design, pharmacy, nursing, medical technologies, animal health, poultry farming, clothing and garment finishing. But the government has also imposed 15% tax on the Private Universities, Medical, dental and Engineering colleges in the FY2021-22. The planning to impose 15% tax is really inconsistent to our education philosophy. As a result the tuition fee will be increased and the students coming from the middle class family will not be able to bear this huge amount of tuition fee. Moreover many Private Universities will be shut down if government does not withdraw this provision.
Finally, the Finance Minister rightly said that if the proposed budget is implemented, new investments will come in the country and new employment will be created. As a result, new horizon will be opened in the country’s economy. Typically this budget can be called a business friendly budget. But it is very much important to ensure accountability, transparency, equity & integrity in the implementation of the budget.
Md. Mizanur Rahman ACS is a Banker, working at Pubali Bank Limited. He is also an Associate Member of the Institute of Chartered Secretaries of Bangladesh (ICSB). He can be reached to this email: firstname.lastname@example.org