Budget offers no cure for price shocks

The government in its budget proposal failed to devise ways to cushion ordinary people from the shock of skyrocketing commodity prices, while the allocation for social security schemes was inadequate given growing demand, the Center said yesterday. for Policy Dialogue (CPD).

The government considered two issues: accommodating illicit income and providing more support to the rich while keeping low- and middle-income groups at bay, the independent think tank said in its reaction to the national budget proposal for fiscal year 2022- 23.

“The government has not clearly mentioned how to protect ordinary people from continuing inflationary pressure,” said Fahmida Khatun, executive director of the CPD, at a press conference at Lakeshore Hotels in the capital.

The latest inflation figures compiled by the Bangladesh Bureau of Statistics (BBS) did not represent the real problem for ordinary people, he said.

“The prices of some essential commodities have even increased by 40-45%, according to the Trading Corporation of Bangladesh,” said Fahmida, adding that there was a discrepancy between the increase in commodity prices on the market and the rate. of inflation in April.

According to BBS data released on May 18, inflation in Bangladesh rose to 6.29% in April, an 18-month high, in a context of consistently high food and non-food prices. Headline inflation was 6.22% a month ago.

The government has set the inflation target at 5.6% for the next fiscal year, which also contradicts reality, Fahmida said.

The government says global factors are largely responsible for runaway inflation in Bangladesh, but its projection does not conform to its position, it said.

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“We don’t know when the Russia-Ukraine war will end. Furthermore, the latest wave of the coronavirus pandemic in China has dealt a new blow to the global supply chain,” he said.

“So how is it possible to lower the inflation rate to 5.6 percent?”

Fahmida thinks the government can still withdraw or reduce taxes on at least 29 essential items, which will help ordinary people cope with the price shock.

Khondaker Golam Moazzem, the think tank’s director of research, said the government could provide some relief for low-income people by increasing the allocation in its social security programs.

The government in the proposed budget allocated Tk 113,576 crore for social security schemes, up 1.89% year-on-year.

But the government has included the pension fund for retirees in its social safety nets endowment. If the pension fund is excluded from the disbursement, the allocation of the social safety nets as a percentage of the proposed budget will be 12.62 per cent, much lower than the 14.9 per cent in the revised budget of the outgoing fiscal year.

Mustafizur Rahman, a distinguished member of the CPD, said that allowing money launderers to legalize their illicit assets is completely unacceptable and illogical from an economic, political and ethical point of view.

People who have laundered money abroad will be able to legalize their real estate by giving 15% tax and whitewashing money by paying 10% tax, according to the budget proposal.

They will be able to get their money back to the country if 7% of the total amount is paid as a tax to the government.

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But Mustafizur said such tax privileges granted to dishonest people in the past have not produced any positive results for the economy, rather such government policies will only encourage capital flight from the country.

As wealth inequality increased during the pandemic, the government is expected to raise the personal income tax for the wealthy to 30% from the current 25%, he said, adding that the increase in the rate would also translate into tax justice.

The CPD also proposed to the government to increase the tax-free income limit to 350,000 Tk from today’s 300,000 Tk. “If this were done in the budget, people would get some respite from the inflationary pressure,” Mustafizur said.

“The central philosophy of the budget is to mobilize the assets of the rich and distribute them to the poor so that the basic rights of ordinary people can be protected,” he said. But philosophy was largely absent from the proposed budget, she added.

The government has set a lower inflation target for the next fiscal year as it believes the US dollar will depreciate to 86.2 Tk against the local currency in the next fiscal year, he said.

But it would be difficult to strengthen the taka as exports and remittances will not be favorable enough to make up for the dollar shortage, Mustafizur said.

Towfiqul Islam Khan, a senior CPD researcher, said the budget was able to “diagnose the symptoms of the disorder but failed to prescribe the required medications.”

Middle- and low-income groups were largely neglected while the wealthy and money launderers were offered incentives, he said.

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The government has proposed to impose a 15% value added tax on the import of laptops, which is now considered an essential device for everyone, Towfiqul said.

The imposition of such a tax on laptops, which has seen a rise in prices in recent times, shows that policy makers have no knowledge of the market.

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