Mustafizur Rahman, middle, executive director of Centre for Policy Dialogue (CPD), speaks at a press conference in Dhaka yesterday. Debapriya Bhattacharya,right, CPD distinguished fellow, and Fahmida Khatun, left, head of research of the private think-tank, are also seen.Photo: STARMaintaining macroeconomic stability and growth momentum amid soaring inflation will be a major challenge in the upcoming budget, the Centre for Policy Dialogue (CPD) said yesterday.
The think-tank also identified growing subsidy requirements, rising interest rate, poor implementation of public investment programmes, low foreign aid disbursement and a declining balance of payment as potential threats.
The CPD placed a set of proposals for the upcoming budget. The proposals include raising the tax exemption limit to Tk 200,000, mandatory tax identification number for all beneficiary owner's accounts and introduction of capital gain tax on stockmarket transactions.
The FY2011-12 budget should not allow legalising black money, said the CPD, arguing that it did not work anytime in the past.
Fahmida Khatun, head of research, read out the proposals at a press conference at the CPD's Dhanmondi office in Dhaka.
“There is no magic bullet to contain inflation. It must be addressed by overall macroeconomic management,” said Debapriya Bhattacharya, CPD distinguished fellow.
Bhattacharya said inflation is expected to be higher next fiscal year due to high commodity prices on the international markets.
He said the initiative to contain inflation is limited. The government can better concentrate on facilitating investment to help people get jobs and increase their purchasing power, he pointed out.
CPD Executive Director Mustafizur Rahman said food inflation on a point-to-point basis has crossed the double-digit level.
“So, an increase in homestead productivity could reduce both costs and food inflation,” he said.
The CPD proposed continuation of zero tariffs on import of rice, wheat and lentils, while VAT on edible oil should be withdrawn. It also said food procurement should be set at 1.2-1.5 million tonnes.
It asked the government to invest in agriculture in Africa where Bangladeshis work.
About non-ADP (annual development programme) expenditure, Bhattacharya said the amount has been increasing without transparency. “We still don't know who is getting how much subsidy in agriculture or energy,” he said.
About the revenue collection, he said non-NBR (National Board of Revenue) income is about 25 percent of the total revenue earnings, but surprisingly it is declining.
“It means that the government assets including dividend from public enterprises and income from railway or telephone, fail to provide return to the government,” said Bhattacharya.
Fahmida said introduction of tax on capital gain would reduce stockmarket volatility. “This is a common practice in many countries.”
The CPD said tax break facility will end in June and the government should impose 1 percent tax for a limited period on selected industries.
The NBR should be strengthened to avoid duplication, harassment, reduce corruption and improve transparency and efficiency in tax collection.
The introduction of Value Added Tax (VAT) Act 2011 and direct tax acts is a welcome move but the stakeholders and experts should be consulted before finalising the laws, said the CPD.
The CPD also supports a government move to introduce wealth tax as assets are being accumulated by a section of people.
It also asked the government to expand entrepreneurship equity fund beyond the agriculture and IT sectors to light engineering, melamine and electronics industries. The think-tank said the government should allocate special funds for the development of industrial clusters and garment zones.
The VAT on raw materials for domestically produced medicines and powder milk should be exempted. The CPD also suggested jute be treated as an agro-based industry and cutting import tariff on capital machineries for SMEs.
It also called for continuing cash subsidy for the textile industries for another five years and extending time limit for claiming duty-drawback to one year.
The speakers said the budget must raise allocative efficiency of public expenditure, enhance implementation capacity, and strengthen monitoring and outcome assessment.
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