NBR is mulling to impose Taka 2000 tax on all TIN holders irrespective of their income. I am taken aback by this very idea. Even a man with zero income like me or below the taxable income has to pay this amount if NBR's idea comes into reality. This is unjust and has serious drawbacks.
Unjust in a sense that while unemployed and lower income groups will pay a minimum amount, govt has not yet raised the corporate tax, which was earlier lowered from 21% to 20%. Many defaulters do business as usual with tax payer's money through loan rescheduling and are allowed to invest abroad. However, it is not known how much money they pay as taxes.
NBR may lose more revenues than what it anticipates to achieve. Those with variable income and pay taxes not more than Taka 5000 will prefer to pretend themselves belong to Taka 2000-tax group and those who are planning to obtain TIN next fiscal year will prefer to go off the NBR radar. At the end of the day NBR may find itself on the loser’s side.
There are plenty of ways NBR could augment its revenues:
NBR could break down TIN holders into two classes: TIN holders with single earning source and TIN holders with multiple earning sources. Many of the latter group try to validate their swollen wealth by introducing multiple sources. In case of astronomical sum they could pay a relatively high tax on the earnings from secondary sources.
NBR could think of reimposing duties on oil as international prices are coming down. It is a vital source of NBR revenue and a bad idea to downsize it. If oil price touches $130 per barrel in future, then NBR may reconsider removing duties.
Increase the income tax and other tariffs of quasi-state and private companies that evade regular audit. This one single step will dramatically improve the governance.
NBR could impose 1 or 2% tax on interest earning of National Savings Certificate. No one will bother much as the revenue earned will be used to finance the interest payment later.
Since MFS has become increasingly popular for daily transactions, NBR could take a look at the transaction data by delving into operator's server and impose duties on accounts that transact more than Taka 100,000 per month.
Some other ideas I mooted in the piece "VAT Week Resolution", on December 10 ,2022.Sharing parts of it again1:
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Govt uses the VAT money to pay subsidy and other expenses.Though mismanagement in public banks put them into precarious position,govt keeps funding these banks using taxpayer’s money to run operation. On the other hand,duties and taxes on export items are still low. Many exporters do not bring their money back home and pay a very low source tax,1%. Yet they receive regular subsidy.Government should raise the source tax to 2.5% and provide subsidy to export earnings brought back home. Even 0.25% increase in export tax would yield good revenue for the government without compromising the competitiveness of the exportable items.
Micro entrepreneurs and street vendors fall out of NBR's reach because their businesses do not fall into NBR's VAT category. Meanwhile, extortion from Dhaka streets every year reached Tk 14 billion ,according to an NGO study.NBR could introduce special bonds/tools for them which opens the alley for purchase of bonds worth Tk 100/500 every month/quarter at their own will.Part of the revenue will be used to form crisis fund for them in case of working capital need or bankruptcy.
In addition, NBR could introduce special gadgets with satellite data link so that road side kiosk and shops could generate VAT included cash receipts and the info could be sent directly to NBR server. We have a communication satellite and we need to make good use of it. Our software developers could develop software for such device and there is no need for foreign firms.
This kind of gadgets without data link already introduced by bus conductors in the name of e-ticketing and squeeze out unreasonable amount from commuters’ pockets. It is interesting to note that those with malevolent intention increasingly hinge on gadgets while govt is shy to introduce them. In local neighborhood shops and groceries, concept of money receipt has become a bygone era thing long ago. To document every transaction this gadget is a must.
Now in Bangladesh we see criminalized neighborhoods with the spread of grey areas in business and other sectors. Introduction of VAT gadgets will create VAT culture at the grassroot level business and decriminalize the neighborhoods with greater transparency and documentation.
"""
It is not right to slap Taka 2000 tax on all TIN holders. This decision is tantamount to mockery with honest taxpayers. Below tax income may be segmented and different layer of minimum taxes could be introduced. For instance, people with income below Taka 100 000 would pay Taka 500 or 0. More than 1 lakh but below 2 lakh would pay Taka 1000.And the others will pay Taka 2000. NBR has plenty of means to augment its revenue earning. I think it would be a wise decision to discard the minimum tax of Taka 2000.
Notes And References
”Vat Week Resolution “,Rezaul Hoque,December 10,2022,https://hoquestake.blogspot.com.For more read at
https://hoquestake.blogspot.com/2022/12/vat-week-resolution.html?m=1
To Reduce dollar dependency,
Countries ink deal to swap currency.
In the wake of dollar crisis, government is mulling to trade in currencies like Yuan and Rupee. A huge debt obligation in the years down the line has made the prospect of such idea even stronger. Undoubtedly pressure on dollar will be huge. This year alone we have to make interest payment of Taka 1 trillion. However, Bangladesh is looking for alleys to settle some trade deals and debt obligations in other currencies.
So far Yuan and Rupee have emerged out as the would-be currencies for future limited trade. But there is a growing debate about sustainability of trading in such currencies.
Central banks in this region are not unfamiliar with currency swap. Back in 2018,I wrote a piece titled “Lessons From India-Japan Currency Swap Deal"1. Sharing parts of it again:
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Last week I took a lot of interest in two news. First one is about a $75 billion currency swap deal between Japan and India. Second, Taka is getting stronger against the Indian Rupee as the latter continues to depreciate against US dollar.
India and Japan inked a $75 billion currency swap deal. According to reports, the deal will help both countries to do trade in Rupee and Yen, without depending on dollar. The deal came amid volatile nature of Rupee against the US dollar. Economists and experts say that though India, whose foreign exchange reserve is more than $340 billion, is in better position in terms of stocking forex and in financing trade deficit , the currency swap deal with Japan will offer it a psychological comfort in any kind of worst case scenario in the wake of trade war by lessening its dependence on Dollar.
In brief, a currency swap deal between two parties is a currency agreement that will take place at a future date at an exchange rate that prevailed in the past. The parties will negotiate the exchange rate. This kind of deal helps parties get rid of brokerage fees, costs and uncertainties in volatile currency market.
For instance, an Indian exporter may export some goods to Japan. He gets the exports receipts in dollar at his bank account. Then he has to convert the dollar again to Rupee to meet his expenditure at home.
Meanwhile, another Indian importer imports some Japanese goods and markets it at home. He buys dollars and sends it to Japanese exporter’s bank account.Japanese exporter converts it to Yen to meet his local expenditures. This Yen-Dollar-Rupee and Rupee-Dollar-Yen conversion process takes lots of fees and costs. In any kind of uncertainty in the foreign exchange market, the costs also climb up. Central banks of the two countries make a deal that the two will swap their currencies at an agreed exchange rate in the future. So the central bank of India deposits rupees at the account of Indian exporter and central bank of Japan subtracts yen as import payment from the account of Japanese importer. Processing the whole transaction requires less time and cost and at the same time the swap deal works as a cushion for exporter and importer in a volatile currency market.
This kind of deal needs prior agreement between governments.
Bangladesh needs more of this kind of currency deal than India. Bangladesh’s forex reserve is not enough to meet the looming uncertainties in the volatile currency market. In 2016-2017, our Forex reserve was $33.49 billion. At the end of September 2018, it stood at $31.95 billion. Trade deficit is on the rise .In 2017-2018, our overall balance was negative. Current account deficit grew by 7.35 times (Source: Bangladesh Bank). Need for backing up the forex reserve has never been felt so dearly before.
If one takes a look at Bangladesh’s top trading partners, he will understand the point I am making here. India and China are two key trading partners. Moreover, the two are offering credits to finance many projects here. Add another influential country to this list: Russia, which is also financing major energy projects. Trade is also growing with Russia.
Every year we are repaying interest plus part of the debt in foreign currency.In addition, imports from these countries are higher than our exports.
In recent years, our exports to these countries are also growing. But trade balance is always against us as exports never catch up the imports.
According to Bangladesh Bank, we imported $ 4.72 billion worth of goods from India in the first two quarters of this year(2018).Meanwhile, we exported only $402 million worth of goods in the same period.
"""
In 2021-2022,export to India reached $1.5 billion. However, trade deficits with both India and China have widened.
But another thing is that the number of Indian tourists to Bangladesh is increasing. Every month, Bangladesh issues 15000/20000 Visas to Indians. Meanwhile, a far more greater number of Bangladeshis travel to India every month. In addition, Indian workers remit around $4 billion every year. If both the countries agree, then the two can use Rupee and Taka in these cases, easing demand on dollar in both the countries.
But Bangladesh is willing to trade in these currencies in limited amount. With India, $5 billion worth of trade could take place in Rupee. However,unlike Yuan,Rupee is not an IMF SDR and is susceptible to volatility. Both Bangladesh and India may reach a currency swap deal by June,addressing the challenges of doing business in Rupee. An IMF SDR like Yen /Euro could be a better alternative as they are less prone to market volatility.
Bangladesh already lent $200 million at LIBOR + 2.0 percent interest rate to Sri Lanka under currency swap deal2. Bangladesh extended the repayment period till September, 2023 at the request of Sri Lanka. Currency swap between India-Bangladesh is anticipated to be attractive. Otherwise, it will not take off. Nitty-gritty of the deal is still unknown. Such deal may pave the path for greater market access to India and augment Indian investment in Bangladesh. But the market volatility casts shadow over Rupee-Taka deal.
Notes And References
”Lessons From India-Japan Currency Swap Deal”,Rezaul Hoque,https://rezaulhoque.wordpress.com,November 03,2018.For more read at
https://rezaulhoque.wordpress.com/2018/11/03/lessons-from-india-japan-currency-swap-deal/
”Sri Lanka Set To Get Another $100 million From Bangladesh Under Swap Arrangement “,Siddique Islam,The Financial Express,August 30,2021. For more read at
https://thefinancialexpress.com.bd/economy/bangladesh/sri-lanka-set-to-get-another-100m-from-bangladesh-under-swap-arrangement-1630290778
Mobile operators face whimsical tariff,
Consumers pay a price massive.
Loss of unused data has become a major concern among mobile data pack users. BTRC held several hearings in the past about the issue.Mostly private operators get the blame. Now public operator like Teletalk joined the party. Currently, Teletalk offered the cheapest data pack in the country.
Other operators, which continue to sustain punitive tariff payment, just pass their burden on consumers,making their products much expensive.
Even the 72-hour duration data pack became costly compared to other competitors. But the problem is it is not easy to measure the data you consume.
Back in 2018 when BTRC raised the duration of small internet package ,I wrote a piece titled “Asymmetric Information And Data Pack” highlighting this missing data phenomenon:
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Bangladesh Telecom Regulatory Commission has recently instructed all the mobile operators to raise the duration of small internet packages. From now onwards, all the packages have minimum duration of 7 days and maximum duration of 30 days.
According to a news report, mostly students, youths, occasional internet users and lower income groups are main clients of this small packs.
As small packs are still available in the market, consumers are still somehow unaffected by the decision.
But the operators may drive them to relatively costly packages using BTRC decision as a pretext. The restriction is only on the duration.
Being a user of this small packs, I am also likely to suffer from BTRC decision.
Nowadays data packs become a major source of revenues for mobile operators.
One can see the asymmetric information playing a role in the interaction between data pack purchaser and operators. Here consumers (principal) have no clue on the type of operators(agent)they are dealing with.Operator may pretend to be honest and act as a dishonest one.
Despite the fact that there are many operators in the cellular data market, they behave and offer products in unison. And two big operators have merged. So, this cellular data market cannot be categorized as a textbook competitive market.
When you buy goods from a grocer you have the means to recheck the quantity you bought. Unfortunately, most of the data pack users do not have means to verify the usage of purchased data.
One may argue that there are apps that keep records of data usage. But I lost faith on them after I had found one giving suspicious reading.
So an internet user may pay for a 50 MB pack but ended up getting less of what he paid for. It is pretty easy to monitor the talk time, but very hard to measure the kilobyte or megabyte you used.
So, it is highly likely that operators cheat their customers. This is an example of hidden information problem, where some operators pretend to be selling the right data pack but deliver less output.
I would like to share my own experience in this regard.Two years ago I used to buy data pack of 1 GB at Tk 89 for a week. Soon I discovered that I ran out of my data before the expiration date. I used the mobile internet and pretty convinced that smartphone consumes less data than a laptop. Earlier I had used internet on my laptop spending less than Tk 100 for the same data pack for a month.
I had a belief that using internet on smartphone would cost me less. To my surprise, my internet cost quadrupled. Far too often my internet packs finished before the expiry date.
I visited mostly news sites and social media. And from my past experience I knew these visits consumed modest amount of MBs.
I went to a local mobile balance recharge shop and shared my concern. The pack seller advised me to buy pack for lesser volume with smaller duration. I migrated to such pack.
I discovered that smaller packs worth Tk 5, Tk 11 and Tk20 provided me the desired utility within the given duration. And I slashed significantly my monthly cost on internet.
Later I figured out how it happened. Cheating operator made a profile on your internet usage. For long duration you may not be serious about internet use. Based on that profile, it cheats on you about your data usage. It pretends to be an honest operator and delivers less than what you paid for.
By changing my internet use , I made the cheating process less attractive to the operator. My weekly spending was around Tk 90. By changing the internet use, I reduced it to Tk 30 per week, one third of Tk 90. Moreover, i switched to limited-duration packs, which are less prone to cheating. I altered completely my weekly internet use.Now the operator found my pack less attractive to cheat.
In data pack market all the operators follow somewhat similar product line, all of them offering small data packs, varying slightly in duration and volume.But fierce competition is absent here. You have an aura that there is only one operator.
What BTRC has done is to drive us to situation where consumers are less better off given that asymmetric information prevails in the market. Now the operators , as all of them have to obey the regulator’s decision, may offer data packs that are relatively expensive compared to earlier ones. Every one of them knows other will do the same.
With relatively higher price and duration, consumers also face the higher risk of being cheated. They may end up getting less than what they paid for.1
"""
This is exactly what is happening now. The 72-hour long data ends pretty early. For my case it lasts only 24-hour. It increased my monthly costs 5 times more than what I paid in 2018. So I decided to switch to longer-duration packs with larger data volumes, hoping such move will again slash my monthly costs. Teletalk allows to carry the unused data to the newly purchased pack. I found proofs in smaller packs like 350 MB/750MB/1 GB. It convinced me such things will likely to happen in longer duration pack. Just a day before the expiration of one such pack, I purchased another pack. Previous pack’s unused 7GB data added to the current pack and total data reflected it. But after the expiration, I surprisingly noticed that my unused 7GB data was gone. I did not expect this from a public operator that is meant to protect consumer interest. I suffer a monetary loss in the times of high inflation. I instantly reported the phenomenon to BTRC.
Many of the consumers do not take account of such missing data and net welfare loss is huge in this case. The resources may end up covering expenses of some vested quarters, who are not good for the people. I do not blame the operators too much as they have to do business in an environment that is becoming difficult to operate. If government continues to slap tariff, we the consumers bear larger part of the burden. No wonder more people switch back to dumb phones nowadays.
Notes And References
”Asymmetric Information And Data Pack”,Rezaul Hoque,December 16,2018,https://rezaulhoque.wordpress.com. For more read at https://rezaulhoque.wordpress.com/2018/12/16/asymmetric-information-and-data-pack/
Plant risks to get shut down over dues,
Dollar crisis hits companies of all hues.
Dollar crisis in the country has become acute. Recently, news report surfaced on the press divulged that the Chinese govt refused to sell coal to Payra Thermal Power Plant. The plant authority has not yet cleared the due payment of $293 million for earlier shipments1. The current stock will run out in two weeks. Earlier Rampal Thermal Power Plant ran similar problems stemming from government’s strict regulation on dollar purchase. Later government intervention resumed its operations.
Adani group also placed a bill of $20 million before the Power Development Board for the electricity it generated in Jharkhand power plant.
Meanwhile, another news report says Biman Bangladesh Airlines,national flag carrier of Bangladesh,has yet to pay Taka 20 billion($186.91 million) to Bangladesh Petroleum Corporation(BPC) for the jet fuel it supplied2.
Perhaps the worrying thing is the decline in export and remittance receipts. And $3 billion worth of export proceeds have not yet reached the local banks during the July-February period of current fiscal year3.
This will indeed cause great pressure to dollar demand. In this backdrop, central bank has little option but to devalue the currency further. Value of Taka has long been artificially pegged at some rate that is not reflective of the market. In my observation two things hold back the ruling regime to let market determine the value of Taka: first, it fears market rate will increase the cost of development expenditure; second, deterioration of inflation that will raise the cost of sending money abroad.
An economist and former staff of IMF Ahsan H. Mansur argued that artificially pegged Taka presented a swollen estimate of GDP. Any adjustment will shrink that estimate. In an election year, govt is pretty much reluctant to do this as the stance will be politically costly.
Toxic political climate fuelled by anarchistic behavior also played a role in this crisis. It increases incidence of money laundering and capital flight.
In 2009,when AL assumed power , 1 US dollar fetched Tk 68.80. In 2014, Taka depreciated further to 77.72. In 2019,exchange rate became Taka 83.85/US dollar4. And now 1$ fetches Taka 107 officially and Taka 112 unofficially. Though such depreciation increased our competitiveness and our export earnings manifolds, illicit capital flight has also increased many times. And our budget deficit also gets widened. The fast decline in reserve(now $29 billion) also puts pressure on the exchange rate.
There are initiatives to trade in Yuan and Rupee. However the transaction will be in small amount and bigger impact of such transaction will take time.
There is no alternative to break the political stalemate and reach a reconciliation in a bid to send a positive signal to the market and investors that will ultimately restore the confidence and restrain the money flight. Look at Sri Lanka.Since there is no stalemate, Indian and Chinese investors flock there to invest. To improve drastically things at home when recession like scenario looms large in the West, there is no alternative to reconciliation and stability.
Notes And References
“Koila Sonkote Bondho Hotey Parry Payra Bidyut Kendro O(Coal Crisis May Shut Down Payra Power Plant)”,Mahfuz Mishu,Jamuna News,May 02,2023. For more watch
https://m.youtube.com/watch?v=AjO0PeRlXIM&pp=ygVI4Kaq4Ka-4Kav4Ka84Kaw4Ka-IOCmpOCmvuCmqiDgpqzgpr_gpqbgp43gpq_gp4Hgp44g4KaV4KeH4Kao4KeN4Kam4KeN4Kaw
“Bimaner Bokeya DUI Hajar Koti Taka,Adaye Hard-line E Sorkar(Biman Yet To Pay Taka 20 Billion,Energy Ministry Is On Hardline)”,Orthosongbad,April 09,2023. For more read at
https://tinyurl.com/bdf9v7y2
“More Strain on Reserves As Unrealized Export Proceeds Hit All-time High of $3 Billion “,Jebun Nesa Alo,The Business Standard, May 03,2023. For more read at
https://www.tbsnews.net/economy/more-strain-reserves-unrealised-export-proceeds-hit-all-time-high-3b-625970
