Mixed Reactions To Reform Programs

Blaming reforms for economic woe Leaves people confused without any clue.

As some reform programs are about to see the light, mixed reactions are being observed in the economy. Indices fell below 5000 points and daily transaction reached below Taka 4 billion at Dhaka Stock Exchange. Imposition of 15% gain tax is identified as the main reason. NBR is likely to put a 15% tax on over Taka 4 million capital gain in the stock market in a bid to meet the revenue target. The decision is indeed a good move as it will have less impact on ordinary people.In general,revenue will rise for the following reasons:

• Depreciation of Taka increases the taka amount of revenue.
• 15% tax on remittances and 15% gain tax on stock trading gain will have an impact on overall revenue generation.
• Bangladesh Petroleum Corporation (BPC) is installing a system to get real time data on transaction and payment. It will help getting VAT money from BPC in the quickest possible time. BPC VAT is one of the large sources of VAT revenue.(for more read "Smart Fuel Distribution Chalu Korte Chai BPC(BPC Wants To Start Smart Fuel Distribution)", Sanchita Shitu,Bangla Tribune,May 23,2024.Link:https://tinyurl.com/shjbnct4)
• Restructuring of existing tax slabs above the minimum taxable income (proposed to be fixed at Taka 500,000) will likely to boost revenue. Because subsequent slabs will likely to see higher taxes.
• Good harvest of winter paddy, low price of crude oil in international market and crawling peg exchange rate will put less pressure on resource allocation. Redirected resources to private sector will increase import and import duty,which registered an 11% growth till February this year.

While UAE imposed tax on outgoing remittances, a great deal of unease is seen here on the issue of remittance tax. Back in March this year,I penned a piece titled "Will Tax On Remittances Lower The Inward Flow?"(see the link: https://hoquestake.blogspot.com/2024/03/will-tax-on-remittances-lower-inward.html?m=1)highlighting why such move will increase revenue. Universal applicability of the tax rather than targeting a sector will bring its success. Import duty,VAT are the examples. Imposition of such taxes does not shrink the volume of tradable goods in the economy, nor does it have any adverse impact on the economy. A quick look at the data on import duty and VAT over two decades will clear the point I like to make.

There is a lot of misinformation about the IMF programs on the public domain. All the blames of current economic situation are heaped on IMF program. And it is being presented as anti-people. But it is the IMF that first raised the issue about non-monetary use of $7 billion forex reserve money through a letter. The letter luckily got leaked in the press and everybody became aware of the true reserve situation, avoiding further unreasonable use of forex reserve. It is the IMF team that raised question about investment of pension fund into savings certificates that offer interest rate lower than the inflation rate. It is the IMF that prescribed to raise the ceiling of minimum taxable income to Taka 500,000. Monthly fuel price adjustment resulted in reduction in bus fare. [It is the IMF that objected inclusion of national savings certificates' (NSD) interest security spending( for more see the link:https://www.prothomalo.com/business/economics/vu79oq3bdn ).*]This clearly indicates reform programs are benefitting the people a lot and plugging the holes that keep nourishing a certain quarter at the expense of public money.

[*Update: This piece has been updated by me on June 01,2024 at 20:25 Bangladesh Standard Time (BST). Update includes IMF's objection on inclusion of NSD interest into social security spending.]