Budget 2020-21: A fiscal law perspective

The proposed budget of 5 lac 68 thousand crore for 2020-21 fiscal year is a robust one. It is now called the budget of 'economic recovery' and 'not of emotion or high ambition', but the reality of the budgetary scheme is totally different as 'development' has been reiterated again even during this difficult time of handling Covid-19 pandemic. A total of Tk. 330,000 crore revenue collection target has been set for the National Board of Revenue (NBR), which is, according to the Centre for Policy Dialogue (CPD), quite "unrealistic" amid the uncertain pandemic situation. If coronavirus crisis continues for a long time, which the WHO presumes to be, and if the country is locked down for much longer period of time, the high ambitious target for revenue collection through NBR would probably be frustrated.

According to sections 2(19) and 2(20) of the Value Added Tax and Supplementary Duty Act, 2012, VAT is payable when there is "supply of goods or services". In post-pandemic time, the purchase capacity of people will presumably be hampered, and therefore, there will be less supply and less collection of VAT. The rate of Advance Tax is proposed to reduce from 5% to 4%. Under section 31 of the VAT&SD Act 2012, every registered or registerable or enlisted person, who makes a taxable import, shall make payment of the VAT or turnover tax in advance at that rate. The fact is that, every registered or enlisted importer who has made a payment of Advance Tax may' in the prescribed manner' claim' in the return of the related tax period' a decreasing adjustment equal to the amount paid as Advance Tax. Therefore, nothing would include additionally in the revenue collection by this reduction or increase of rate. Though the instant collection of revenue would decrease, this move is also appreciated.

Due to the impact of Covid-19 on the people's income, the collection of revenue from the income tax would also be at stake. Huge people are now under the threat of being jobless and devoid of income. Many people, who are in private employment, are receiving no or partial salaries. When this is the situation, the slab of taxable income is proposed to increase (for male, 3 lakh from 2.5 lakh and for female, 3.5 lakh from 3 lakh). Therefore, the extent of tax collection will practically become narrower. Corporate tax rate for non-listed corporate is reduced from 35% to 32.5%, while tax at source is reduced from 1% to 0.5%. Section 48 of the Income Tax Ordinance, 1984 defines deduction at source and advance payment of tax considering which, either an increase or decrease in that head, will not be of any ultimate benefit for the taxpayers or for the NBR. The collection of deduction at source from individual taxpayers, rather than corporate, would be a wrong move too. 

In cases of customs and bond, revenue is collected from export and import transactions. This collection would also decrease as for less consumption. There would be less manufacturing and consequently, less import of raw materials and capital machineries. Complete automation in customs, reduction of misuse of bond facilities, more infrastructure and port facilities, etc. may increase revenue collection substantially. Furthermore, rapid installation of EFD (Electronic Fiscal Device) is also necessary. Keeping the VAT exemption facilities to encourage national manufacture should also be considered.   

The budget deficit is 6%, which is of around Tk. 190,000 crore. Certainly, banks are going to be over burden by government borrowings, which will have an impact in the overall economy. Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country in a specific time-period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of the country's economic health. That is why Bangladesh could not come out of the allurement of showing bulky GDP, i.e. 8.2% for 2020-21 fiscal year.

There are some possible options to opt for to ensure better economy. First and foremost, large-scale investment is necessary to promote export diversification. Golden time of jute should be brought by making it golden fibre again. The issue of imposition of anti-dumping duty in jute and jute goods by India should be brought to the World Trade Organization (WTO) dispute settlement forum. Approximately 20% of our jute is exported to India, and hence, more markets for jute goods should be explored besides Turkey, Brazil, etc. Export of leather, pharmaceuticals, light engineering, etc. also should get priorities and should be incentivised. For agriculture, we have learned that marketing and transportation facility is as much important as production. Diplomatic endeavours should be accelerated for more labour and more remittance inflow. This is perhaps an ignored area with high production. There should have transparency in exploration of blue economy in the Bay of Bengal. This can be a huge area for recovery of economy. Proper survey before going for exploration is necessary to maximise the benefit of the blue economy. More expenditure is necessary for employment generation and more allocation of money is necessary for Technical Education (which is proposed as Tk. 345 crore in association with Madrasha education). More Technical educated youths are necessary to make entrepreneurs at the world after COVID-19. Development expenditure of Tk. 215,043 crore may be unreasonable and unexpected. Large infrastructures may be halted for this crisis period of pandemic. A total of Tk. 10,000 crore as emergency allocation for health sector has already seen as insufficient.

Overall, it seems that we have many great economic challenges to face in the next fiscal year. The earlier we identify them and ger ourselves prepared, the easier we collectively survive this pandemic and related future economic hardships and make the lives of millions of Bangladeshis tolerably liveable.

THE WRITER IS AN ADVOCATE AT THE SUPREME COURT OF BANGLADESH AND REGIONAL REPRESENTATIVE (NORTH ASIA) AT INTERNATIONAL CHAMBER OF COMMERCE YOUNG ARBITRATORS' FORUM (ICC YAF).