The tax structure proposed in the new budget would fuel inflation which could have negative impacts on the overall economic growth and investment, a leading policy think tank predicts.
At the same time, the taxation structure would increase the tax burden on the middle- and lower-middle-income groups, according to the Centre for Policy Dialogue (CPD).
"The proposed tax structure outlined in the budget would increase both production cost and living cost in the country," said Debapriya Bhattacharya, Distinguished Fellow of the CPD, at a post-budget press conference in the capital Friday.  
"Already, the price of rice is in an upward trajectory while the prices of oil and gas have already increased. At the same time, the exchange rate of Taka is also likely to go downward in the coming months," the leading economist observed to underpin his fear about price spirals.
"Considering all this, there is big possibility of increased inflation in the next fiscal," he said, adding: "This can have a negative impact on the overall growth and investment in the country."
The policy think-tank came up with its views a day after Finance Minister AMA Muhith placed an 'ambitious' Tk 4.0 trillion-plus national budget for the fiscal year 2017-18.
The new budget relies largely on collections under the new VAT law to cover a 35 per cent growth in revenue earnings.
The proposed budget has estimated the inflation to remain stable at 5.5 per cent. However, CPD officials termed this inflation estimate 'questionable'.
And the budget has proposed the introduction of a uniform single VAT rate of 15 per cent for the next three years.
Turning to this provision, Debapriya said, "The Finance Minister did not clearly mention whether the rate will be changed or brought down after three years."
At the same time, he added, no clear implementation plan for enforcing the act has been mentioned and no assessment of additional revenue generation from the implementation of this act has been made public.
Mentioning that supplementary duty has been increased for some major industries, CPD officials noted that although it is expected to generate additional revenue, the measure may increase tax burden on importers while a number of sectors will suffer from higher cost of doing business.  
Mr Debapriya was also critical about the excise duty on bank- account balance, which he said would be a disincentive for those using banking channel at a time of falling interest rate on savings.    
"We always have called for taxing those who are smuggling their money abroad and not increasing the tax burden on ordinary taxpayers," he told the journalists.
"But, the latest budget would mainly work to increase the tax burden on middle- and lower-middle-income people," the economist added.
He also found the absence of any specific work plan for implementing the annual development plan or the overall budget.
"We agree with the expectations laid out in this budget," the eminent economist said. "But we do not see any specific implementation plan for realising those expectations."
Mr Debapriya observed that it would not be possible to implement this budget without direct involvement of the public representatives.
Currently, he said, parliamentarians or local-government representatives do not have any role to play in the monitoring of project implementation.
"It would be wrong to think that such big budget will get implemented only through public administration and without any true involvement of public representatives," he added.
CPD officials also lamented what they said the absence of any specific guidelines for reforming the banking sector or for rejuvenating the capital market in the latest budget.
"There should have been some specific guidelines in this regard given their central roles in the overall economy," Debapriya said.
CPD researchers also observed that the much-hyped GDP growth is having little impact in terms of employment generation in the country.
"While achieving the growth figures has dominated attention, it has not been able to create more jobs in the economy," Debapriya said, adding: "Job creation has slowed down while unemployment rate remained unchanged."
CPD officials also noted that as per the latest budget, the gross foreign-aid requirement will be around US$ 7.6 billion, which is an almost impossible target given that the record foreign-aid inflow was only US$ 2.7 billion back in the year 2016.
"Normally, it takes four years for the government to spend such amount of foreign aid money," Mr Debapriya said.
The policy think tank also pointed out a gradual concentration of ADP allocations on certain sectors while relatively moderate rise in allocations for health and education.
"Top five sectors, including transport and power, have received 69.1 per cent of total ADP allocations while there has been moderate rise in primary, secondary and mass education as well as health and family welfare," Mr Debapriya said.
With regard to the provision that allows the investment of undisclosed money — commonly called black money — CPD officials said the inclusion of such provision in the ordinance is morally unethical for honest taxpayers and might encourage people to evade tax.
"The need for a predictable legal framework including a new law on undisclosed money and 'benami' property is tough now," said Mr Debapriya in his extensive observations on the new budget.
Another Distinguished Fellow of the CPD, Mustafizur Rahman, said implementation of the budget would depend largely on enhancing government's institutional capacity.
Executive Director of CPD Fahmida Khatun and Research Director Khondaker Golam Moazzem also spoke on the occasion.
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Source: The Financial Express