Make tax breaks the basics of the currency stabilization budget

Controlling prices to protect the poor

The CPD suggests to the government, also to widen the safety net

| Update:
April 13, 2022 8:59:45 a.m.

Cooling soaring prices should be a priority in next budget given eroding purchasing power of low-income people, says think tank and suggests tax breaks and currency stabilization as basics of budgeting.

With that in mind, the new budget is expected to propose structural changes to traditional tax measures for the requirement period, researchers at the Center for Policy Dialogue (CPD) said on Tuesday.

They believe that the price situation should be controlled by granting tax relief on imports and on the domestic front, by stabilizing the exchange rate.

In placing recommendations for the National Budget 2022-23 in the CPD office, Dr. Fahmida Khatun, Executive Director of the CPD, said that the main focus of the next budget should be the redistribution of income to the poor to feed them by ensuring other fundamental rights and minimize income inequalities.

Dr. Fahmida finds that the inflation rate quoted in government data is inconsistent with the price situation in the local market.

“The base year for calculating inflation is set on the basis of the consumption basket in 2005, while the consumption pattern has changed over the past 17 years,” she said during the meeting. press conference.

CPD Distinguished Fellow Professor Mustafizur Rahman notes that the government is making the budget in a different situation now. “Marginal people are now facing the blow of rising prices due to the Russian-Ukrainian war as they were just beginning to recover from the impact of Covid.”

He said commodity prices would cool down after some time as they are transitory in nature, but at this point fiscal support is needed.

“As this would be the national budget in its own right ahead of national elections, taxpayers and defaulting debtors should not be spared or abetted by measures such as black money laundering or loan rescheduling schemes” , he observed.

He believes that the black money laundering scheme should be stopped as it gives another signal against the mobilization of resources through the fight against corruption.

The policy researcher believes that the current situation in Bangladesh is not alarming to deal with Sri Lanka-like syndrome, but careful steps should be taken on the foreign loan and its repayment term contracts.

He predicts that the trade deficit could climb to $30 billion by next June, putting pressure on the current account balance.

Dr. Khondker Golam Moazzem, CPD Research Director, finds the price situation worrying and says it should be taken into consideration in the next budget.

“The next four to five years are equally important for Bangladesh before and after graduation,” he said.

Towfiqul Islsm Khan, Principal Researcher and also CPD Team Coordinator IRBD (Independent Review of Bangladesh Development) 2022, reminded that the National Board of Revenue (NBR) is not a profit making entity to focus only on collecting taxes by ignoring the purchasing power of ordinary people.

The collection of taxes at the import stage increases following the rise in commodity prices, which would compensate for the loss of revenue due to the tax relief, he noted.

“The collection of taxes from well-to-do categories of people who use cars or smoke could be reinforced in the budget,” he suggests.

Dr. Fahmida urged the government to set a realistic revenue collection target and focus on building institutional capacity.

She suggests increasing the tax exemption cap for individual taxpayers to Tk 350,000, restoring the top tax bracket of 30% for wealthy people, setting a corporate tax rate of 30% for One Person, Company, to review incentives for export-oriented sectors, the phasing out of tax holidays makes it easier for certain sectors to offer new sectors that are still lagging behind.

Reforming the existing revenue structure and accelerating the finalization of new income tax and customs laws are also necessary, she said.

To control money laundering and capital flight, the BNR’s transfer pricing unit could be integrated into the Bangladesh Bank, she added.

She suggests embracing austerity when approving new projects to reduce spending as part of an austerity measure.

Syndication, hoarding, middleman intervention and transportation costs are linked to rising commodity prices, she notes.

The CPD suggests strengthening the role of the competition commission to control the capricious price situation with market information or the measures to be taken.

In the current situation, the government must subsidize fertilizers and agricultural inputs.

However, the distribution of subsidies to farmers must be ensured, says the CPD proposal.

Dr. Fahmida suggested maintaining 2.0% incentives for remittance recipients and keeping the exchange rate stable given spiraling commodity prices.

To graduate from least developed country status by 2026, the government must creatively restructure its grantmaking strategies.

She suggests the government refrain from distributing the second phase stimulus package until the end of the first phase, as many marginal people had not yet received a loan.

Professor Rahman suggests having zero tolerance for taxpayers and defaulting taxpayers and not offering them any benefits until the next polls.

“New projects should be taken with caution while existing ones should be completed based on priority,” he said.

The CPD proposes closing losing public companies, not signing new contracts on an expensive independent power plant, diverting fossil fuel dependencies to renewables, planning the carbon tax from 2026, focusing on environmental issues, reducing taxes on education, improving the health and education budget and excluding the pension fund from the social safety net.

In addition, it recommends increasing social safety net allocations, extending the safety net to the urban poor, investing more in child development and workplace well-being.

The think tank hopes the government will see the next budget as an opportunity to ensure the wellbeing of marginalized people, revive the Covid-hit economy and boost private sector investment.

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