& çâÌæÚUæð´ ·¤è ¥ôÚU Îð¹Ùæ ÁæÚUè ÚU¹ð´ ¥ÍæüÌ ¥ÂÙð ÜÿØ ÂÚU ŠØæÙ ÚU¹ð´Ð ãæÚU Ù ×æÙð´, €UØô´ç·¤ ·¤æ× ·¤ÚUÙð âð ¥æÂ·¤ô ©gðàØ ·¤è Âýæç# ãôÌè ãñ ¥õÚU ÁèßÙ ·¤æ ¹æÜèÂÙ ÎêÚU ãôÌæ ãñÐ ÖÜð ãè ÁèßÙ ×ð´ ç·¤ÌÙè Öè ·¤çÆÙæ§ü €UØô´ Ù ¥æ°, çÁ™ææâæ ¥õÚU ©ˆâæã ÕÙæ° ÚU¹ð´Ð ŠØæÙ ÚU¹ð´, ÜÿØ ã×ðàææ ¥æÂ·Ô¤ Âæâ ãôÌð ãñ´ çÁ‹ãð´ ÂæÙð ·Ô¤ çÜ° ÂýØæâ ¥æÂ ·¤Öè Öè àæéM¤ ·¤ÚU â·¤Ìð ãñ´Ð

Financing the bulging budget

A tax rate hike for individuals is not the answer

MD MATIUL ISLAM
THE coming year's budget is virtually a crash programme for development, which includes a number of expensive and impressive mega projects, including the much-talked-about Padma Bridge.
Mobilising resources, its allocation against competing demands and project execution are all on a war footing. Even between Prime Minister Sheikh Hasina and Finance Minister AMA Muhith, the battle line is well demarcated. While Hasina's favourite grazing ground has been foreign turf for resource mobilisation for mega projects, Muhith has been left to mobilise an enormous amount of back-up local funds needed for execution of these projects and for financing the bulging non-development budget.
Through her own initiative and state visits abroad, she has been able to mobilise billions of dollars for a dozen or so mega projects. From a billion dollar credit line from India on soft terms, addition of 500 MW of imported power into the national grid, $2 billion or more from Russia for modernising the armed forces, a 1,000 MW of Atomic Power Plant several billion dollars from Japan and China for such mega projects as Deep Sea Port, coal based large power plants, four-lane Dhaka-Chittagong highway, Dhaka-Sylhet highway, underground tunnel across Karnaphuli River, a second Padma Bridge to connect the northern region, to a special economic zone for attracting Chinese investment speak volumes about the tireless effort being made by the prime minister to develop Bangladesh into a modern state. She is a prime minister in a hurry. At no time in the history of Bangladesh has so much been
attempted in such a short time.
The finance minister responded to the challenge by pitching the development budget to a record high ofTk 86,000 crore and presenting to the nation a total budget ofTk 250,506 crore, creating another record. With an overly friendly parliament, devoid of a hostile opposition, the budget is expected to breeze through parliament despite open criticism outside that the budget is unrealistic. The demands for grants moved by individual ministers will be voted without any opposition or any serious cut motions.
However, in their enthusiasm and euphoria, what the members of parliament are likely to overlook are the finance bills, which detail the amendments to the existing tax-laws, upward revision of tax rates and introduction of new taxes to mobilise resources to match the high demands for grants. The small prints on the finance bills circulated along with voluminous budget documents are likely to go unnoticed.
This year, there has been an upward revision of direct taxes for individuals that will result in putting some individual taxpayers in tax-brackets higher than that of corporates. Whereas the maximum corporate tax is now fixed at 35 percent for non-listed company and 27.5 percent for listed companies, the tax liability of individuals with taxable income ofTk 1 crore and a net worth ofTk 10 crore, is likely to be around 29 percent of the taxable income. With a taxable income ofTk 2 crore and a net worth of more than Tk 20 crore, the applicable rate is expected to be around 32 percent.
There is need to have a second look at the proposed rate structure. The proposed and existing tax rates will result in the same tax liability for the assessees with an annual taxable income ofTk 12.20 lakh. But with the coming into force of the new tax regime, assessees falling in the income bracket of between Tk 14.20 lakh and Tk 44.20 lakh will save around Tk 10,000 each in taxes, the cumulative impact of which may run into hundreds of crores. This might have prompted introduction of a new tax slab of 30 percent. There appears no need to revise the existing tax structure and introduce a new higher slab for the individuals.
Further anomaly has been created by prescribing surcharge on net assets without applying the principle of progression. Net assets up to Tk 10 crore will attract a surcharge of 10 percent, but as soon as the net assets go above that mark, the surcharge rate for the total net assets will go up to 15 percent. The 10 percent rate on the first Tk 10 crore will no longer be relevant. The same principle will also be applicable for the next two higher slabs. There is need to change the regressive tax rates and make it progressive.
Another area closely related to successful project execution is the private-public-partnership programme that appears to be close to the finance minister's heart, but which may give him the greatest disappointment. Every year for the last three years, there has been substantial budgetary allocation for PPP programmes and every year, the budgetary provision has been diverted to other uses. Unless alternative financing arrangements are made for the Tk 11,000 crore necessary to implement the 34 PPP projects, the basket of PPP projects will remain unimplemented and may swell further. Some of the projects in the list are suitable for financing as joint ventures between public and private sector. There appears no need to wait for parliament approval of a new legislation on PPP to implement projects that can be implemented under joint venture arrangement under existing regulation.
The author is a former finance secretary.