The higher economic and revenue growth targets are unlikely to be achieved, analysts told a discussion, hoping for an implementable budget based on pragmatic macroeconomic realities.
Drastic reforms are not possible at this time of pandemic, but bringing in more taxable people in dragnet, better enforcement of VAT law and rationalising of exemptions can help the National Board of Revenue (NBR) raise its earnings to support rising demand for money.
These are the views of analysts at a video conference arranged by The Business Standard on resource mobilisation for the budget in time of Covid-19 pandemic.
Moderated by Dr Ahsan H Mansur, exceutive director of the Policy Research Institute, the discussion was joined by former NBR chairman Dr Muhammad Abdul Mazid, former lead economist of the World Bank's Dhaka office Dr Zahid Hussain, and former member of NBR barrister Jahangir Hossain.
The Business Standard Editor Inam Ahmed initiated the discussion, the seventh of its kind to highlight the impacts of Covid-19 on economy and life, and finding the roads to recovery.
Although shutdown has been eased, consumer spending has not picked and investment is unlikely to gain pace due to increased risk with low return, Dr Zahid Hossain said.
Global market is trying to get back to normal, but it does not mean that Bangladesh's export would rebound very soon and the prospect of remittance looks even bleaker as many expatriate Bangladeshis returned home during the Covid-19 outbreak and many are fearing to lose jobs overseas, he added.
So, achieving a bigger growth target would be far away from achievement, he said.
Dr Zahid felt that instead of a full-year budget, the government could have opted for an interim six-month budget.
Dr Abdul Mazid identified three major areas of lower tax earnings – limited coverage leaving many taxable people out, exemptions and arrears with government entities.
The revenue target set for the NBR looks unrealistic as already pointed out by the revenue authority chief in a letter to the finance ministry, the former NBR chief said. But earnings can be raised significantly by widening the tax net, rationalising tax exemptions and forcing government agencies to deposit the revenue they collect from people, Dr Mazid said.
He pointed out how a very small tax base keeping a large number of potential taxpayers out of reach and wholesale exemption left the tax-GDP ratio 5 percent lower than what it should be given the size of the country's economy.
Dr Zahid Hussain referred to pressures mounting from various trade bodies, including the BGMEA, for more rebates – some of which may sound logical while others turn out to be unavoidable because of pressure from the political economy.
The much-talked-about policy reforms might not be possible at this moment, but administrative functioning of the revenue authority could be reformed to bring in dynamism in customs and VAT procedures through automation of registration and assessment.
Former NBR member Jahangir Hossain cited a 2003 calculation which revealed that tax exemptions alone deprive the exchequer of revenues amounting to 2.54 percent of gross domestic product (GDP). With whatever capacity it has now, NBR can earn more by netting in more taxable people who are still out of tax dragnet.
"Tax-free turnover threshold has been raised to Tk5 crore and businesses with annual transactions of Tk10 crore or Tk15 crore also avail of the benefit, which an economy like ours cannot afford," barrister Jahangir pointed out, stressing the need for stringent enforcement of law.
He suggested fast-tracking of appeal cases pending with higher courts to recover huge tax arrears and more liberal attitude of revenue people to effectively utilise the alternative dispute resolution mechanism to expedite disposal of revenue disputes with businesspeople.
Responding to a question from the moderator about strong resistance against reform from within the NBR, the former revenue board member said people who are in the "comfort zone" would resist changes and only a strong political commitment can help thwart such resistance and go forward with necessary reforms.
Dr Zahid echoed, saying structural reform would not be possible unless championship comes from the finance minister.
Dr Ahsan Mansur said reforms remain the only answer as the level of revenue earning, still below 9 percent of the GDP, cannot help Bangladesh sustain higher growth needed to achieve the UN sustainable development goals.
"If we could pursue reforms in revenue collection and bring qualitative changes in revenue expenditures, we might not have suffered from a fragile healthcare system at this crucial time of Covid-19 pandemic," the economist regretted.
Recovery cannot be expected this year as new private investment would see zero growth and the public investment, which would not be more than 60-65 percent in the outgoing fiscal year, alone cannot bring the desired growth momentum so long as domestic demand surges.
"That people are coming out in droves will not mean that they would buy fridges or go for festive buying in this situation. They are buying daily needs which is not enough for rejuvenating the economy," the economist said, referring to the lost business seasons of Pahela Baisakh and Eid.