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No more feather duster approach, please

The proposed three year long tax concession on undisclosed money will simply not work. Concessions lasting for three years will certainly end up with feather dusting the surface, like the schemes introduced in 2000-01 and 2004-05.

Moazzem Hossain
THE first budget of the incumbent Finance Minister, A.MA Muhith certainly stirred an intense debate at least in two areas: the projected growth estimate for the 2009-10 (5.5-6.0%) fiscal year and about the proposed approach to whitening black money. Sensing the discord among leading economists and former finance advisers, the FM was on the back foot on both the issues the next day when other economists also addressed the media.
Almost all commentators have been suggesting that the growth forecast is at the lower end of the scale compared to the actual growth achieved during the caretaker government, even when the economy was in turmoil due to Cyclone Sidr, high world food and fuel prices and domestic political uncertainty before the general election in 2008.
The honourable minister made it clear to the media that the growth rate figure of 5.5 was a printing error, it was meant to be 5.5% to 6.0%. Unfortunately, such an error caused a major confusion and was very costly indeed for the ministry.
Most of the economists are of the view that, even if the upper limit of the rate is 6%, it is certainly a low estimate given the resilient performance (relatively) of the Bangladesh economy during a time of great economic slowdown globally. One of the former advisers even suggested that a figure between 6 and 6.5% is appropriate, given the growth expected in the current year (5.9%).
While it is true that 5.5% to 6% is low, one is convinced that this was not the outcome of the performance barometer of only one year (2008-09). I am sure the finance ministry has a mechanism in place to work out the year-to-year rate. One also expects that at least the major think tanks will keep tabs on the macro-economic issues, and know about the method used by the ministry for this purpose.
Generally, there are major categories for such a short-term forecast: conserva-tive, stable and optimistic.-It appears from the press conference that 5.5% to 6% growth next year is a conservative estimate, given the great global recession. Being conservative in uncertain eco-
nomic times is not a weakness.
The honourable minister is perhaps cautious and likes to play on a back foot, which is The. “One should be mindful about sudden external factors, which could drag the economy down without warning.
It is whitening of black money that is the most contentious issue. Even this daily, in its editorial on the 14, appealed to the government for a review or revision of the proposal. Personally, I made my position on whitening black money clear via a Daily Star op-ed published on April 1.
Among other things (including his
personal preference), the finance minister was of the view that this measure was driven more by politics than economics or business ethics. Why was it driven by politics only? Certainly, this was not elaborated in the press conference, hence, it created confusion among the commentators, experts and the media.
While one sympathises with, or can see some merits in, the opposing views to the approach the budget proposed to realise additional resources and create employment out of the whitening scheme spreading over three years, one still is not convinced that a popular government should keep such a dean-up process on the back burner on ethical or other grounds during a global crisis. Is not every dime precious now? For this nation, cleaning up of corruption should start in earnest in order to seal the sources of undisclosed money once and for all.
Let us summarise the objections before concluding. First, it has been mentioned that in the past such a mea-sure brought minimum response, hence it cannot be economically beneficial or sound. Second, without a provision for penalties, such a tax concession to the offenders is morally unacceptable. Third, if at all tax concession has been allowed, this should be only for the honest earnings. Last but not least, the whitening measure proposes an age-old "feather duster" approach and is doomed to fail.
To be fair, it appears that both the commentators and the budget missed the fundamental point on this issue. The point here is to start a genuine attempt to clean the black money mess accumulated over a long period of time. The approach proposed by the budget, in fact, raised more questions than answers - - it allows a feather duster, instead of carrot and stick, approach.
The proposed three year long tax concession on undisclosed money will simply not work Concessions lasting for three years will certainly end up with feather dusting the surface, like the schemes introduced in 2000-01 and 2004-05. This is the last thing the nation wants from a government with unprecedented popularity and genuine engagement with the common people.
Dr Moazzem Hossain is the author of South As/an Economic Development. Routledge, London and New York, 2009