Next Bangladesh budget should focus on raising direct taxes: Experts

Therefore, the next budget should focus on reforming the revenue structure to increase direct taxes, they told a pre-budget discussion organised by the Institute of Chartered Accountants of Bangladesh (ICAB) recently.

Additionally, government employment should be put on hold for some time and some ministries merged to reduce government expenditure, they suggested.

It will need three more years to overcome the yellow zone situation, Ashikur Rahman, senior economist at the Policy Research Institute (PRI), said. Inflation has been in the double digits for the last 20 months and foreign currency reserves have depleted by about $24 billion over the last 22 months, he said.

"We have also failed to balance the financial account, despite efforts by the Bangladesh Bank to improve the situation through currency depreciation and imposing caps on interest rates at fixed rates of 6 per cent and 9 per cent. But there is still much more to be done," Rahman was quoted as saying at the meeting by domestic media outlets.

The banking sector is experiencing a liquidity shortage, with default loans totaling Tk84,000 crore across only 10 banks.

The experts also suggested implementing a contractionary monetary policy to reduce the rate of monetary expansion to fight inflation.

Rahman suggested merging ministries like environment and water, as well as religious and social welfare.

He also raised concerns about the investment return of state-owned companies, which currently stands at only 0.7 per cent, emphasising that it should be at least 5 per cent. 

To increase direct tax collection and reduce tax evasion, former state minister for planning Shamsul Alam suggested that tax returns should be made mandatory for anyone with a National Identification Number.

Alam also suggested reducing corporate tax for listed companies to 20 per cent, with the condition to allocate 25 per cent of profits for corporate social responsibility.

To prevent flight of capital, people having dual citizenship should not be allowed to sell their land if they have not been in the country for the last five years, he suggested.

PRI executive director Ahsan H Mansur said the adverse conditions being faced by the economy may not get over until global inflation subsides, which could take another five to six months.

The private sector is not getting loans due to excess government borrowing, he added.

Fibre2Fashion News Desk (DS)