Finance minister Abul Hassan Mahmood Ali is set to announce the new national budget worth Tk 7.79 lakh crore today, reintroducing the scope for undisclosed money and reducing tax waivers amid a prolonged economic downturn.
Officials at the finance ministry said that the minister would explain the fiscal measures in his budget speech to project an overall revenue earning of Tk 5.41 lakh crore, including Tk 4.8 lakh crore from the National Board of Revenue.聽
The proposed reintroduction of the undisclosed money legalisation facility at a 15 per cent tax rate without question is a political decision, said the officials, adding that the proposed cut in tax waivers will be in line with the $4.7 billion loan programme from the International Monetary Fund.
Former Bangladesh Bank governor Salehuddin Ahmed found the likely scope for legalising undisclosed income without any question unjustified.
Honest taxpayers will feel cheated, he said, adding that the government should impose penalties and ask for the sources of money from errant taxpayers.
Salehuddin Ahmed noted that previous scopes for legalising undisclosed money did not help the government bring undisclosed money and assets much into the mainstream economy.
Last time in FY21, the NBR offered similar scope for errant taxpayers to invest in stock markets and real estate by paying a 10 per cent tax.
Some 11,859 taxpayers paying Tk 2,064 crore in tax availed of the amnesty to legalise over 20,000 crore despite widespread criticism that such scopes were discriminatory against honest taxpayers who are paying more than 10 per cent tax.
Since FY22, the NBR has been discontinuing the opportunity.聽
Officials said that the 82-year-old diplomat turned finance minister was facing daunting challenges to meet the high expenditures on running government administration, interest payments, subsidy allocation, and the expansion of the social safety net programme amid a resource crunch.
The finance minister has little option but to cut decades-old tax waivers to generate higher income taxes, although the step may increase the production cost of many locally manufactured products and services, they said.
The officials said steps were likely to be announced to reduce the import cost of around two dozen essential items to give the majority of the population some relief from decade-high inflation.
The preparation of tariff rationalisation ahead of graduation from the bloc of least developed countries in 2026 may also be reflected in the budget.
The overall 12-month average inflation has been recorded at 9.73 per cent between June 2023 and May 2024, after it hit a decade-high of 9.02 per cent in FY23, compounding the miseries of the majority of people.
Despite an ambitious revenue projection, the finance minister will have to rely heavily on bank borrowing to meet the projected budget deficit of Tk 2.56 lakh crore.聽
Policy Research Institute executive director Ahsan H Mansur said too much reliance on bank borrowing might cause a crowding-out effect and hamper job generation.
Job generation should be one of the top priorities of the government, he said.
Officials said that the finance minister would have to set aside a significant part of the revenue, or around Tk 1.13 lakh crore, for loan repayment to foreign and local sources.
Of the loan repayment, interest payments for foreign loans are likely to hit Tk 20,500 crore alone amid the depletion of forex reserves to $18 billion from $48 billion in August 2021.
The government is expecting to borrow Tk 1.29 lakh from foreign sources, including the IMF.
The IMF has already disbursed $1.1 billion and hinted at the disbursement of $1.15 billion in the current month.
The growing loan repayment and subsidy for power and fretiliser may not allow the finance minister to provide sufficient allocations to the social safety net programme and the annual development programme.
The ADP has been set at Tk 2.65 lakh crore, while around 4 lakh new beneficiaries are likely to be added to the social safety net programme without any increase in fees, said the officials.
The Finance Division has already calculated that a power subsidy of Tk 35,000 crore would be set aside in FY25 against the backdrop of overcapacity in the power sector by more than 50 per cent.
Its officials said that the finance minister might project the GDP growth rate at 6.5 per cent and inflation at 6.75 per cent of GDP in FY25.
