Focus on health insurance and social protection, not GDP growth
The upcoming budget should concentrate on health, social protection and job creation to shield the persons from the impacts of the second wave of the coronavirus, rather than putting an excessive amount of attention on financial growth, the Centre for Policy Dialogue (CPD) said yesterday.
The think-tank also reiterated the necessity for an expansionary macroeconomic stance in the budget for 2021-22, accommodating the mandatory additional public spending.
"The budget will need to allocate resources in a manner that would address the needs of both the immediate and the recovery phase."
In the immediate term, the federal government will need to give attention to health risk mitigation and ensuring food security through expanded safety nets.
"In the recovery phase, that ought to be pursued parallelly, the budget must make allocations and undertake measures given the demands of entrepreneurs, enterprises, businesses and commerce."
The CPD made the calls in its budget proposals, which were presented throughout a virtual media briefing.
The budget for FY22 has been prepared in the setting of several disquieting developments throughout the market: weak performance of the FY21 budget implementation; the persistence of adverse impacts of the first wave of Covid-19; continuing stagnation in private investment; the next wave; and failure of the external sector to pick-up.
"The FY22 budget should address these and the medium-term fiscal reform issues to create a recovery sustainable," the CPD said.
It recommended increasing the allocations for health insurance and social security on important basis.
Some 2-3 3 % of the gross domestic product (GDP) should be allocated for medical sector and 4 to 6 6 % for the social security sector to greatly help the united states fight the pandemic, it suggested.
"Due to coronavirus, the poverty rate has increased when the tax collection had not been satisfactory," said Prof Mustafizur Rahman, a distinguished fellow of the CPD.
"The government has to acquire more taxes from the high-income group and disburse it as cash assistance among the indegent now."
The cash assistance should be given at least two to four times a year for a longer time as it appears that the coronavirus would stay for a couple more years, he said.
"In order to improve the financial assistance, the federal government can raise the utmost income tax rate to 30 per cent from the existing 25 %," Prof Rahman said.
In the FY21 budget, personal tax rates were reduced. Providing advantages to monthly income earners of Tk 4 lakh and above obviously went against the reason for promoting tax justice at the same time when the resource was scarce, the CPD said.
Rahman needed discontinuing the existing black money whitening facility, since it discouraged timely payment of tax and encouraged corruption.
Moreover, taxes on all essential foods should be reduced for the sake of the food security of the lower-income groups, the think-tank said.
The budget proposals came as the united states is passing through the second wave of the coronavirus. As a result, policymakers are, once again, posed with the task of maintaining a balance between your lives and livelihoods.
The agriculture sector has remained resilient through the pandemic. However, the external sector has shown a mixed performance in FY21.
A medium-term plan should be formulated in regards to phasing out the many tax exemptions provided during the pandemic, it said.
Although Bangladesh has received a substantial commitment on external funding support from multilateral and bilateral sources, the disbursement has lagged behind.
"It is vital for the government to pay special focus on ensure speedier disbursement," the CPD said.
From July to December, both earnings mobilisation and public expenditure showed lower uptake compared to the same period of the previous fiscal year. It really is unlikely that the target will be fulfilled during the next half a year of FY21.
"A number of the underlying weaknesses in the institutional structure ought to be strengthened through urgent reforms," said Towfiqul Islam Khan, senior research fellow of the CPD, while making the keynote presentation.
Public expenditure under the next budget should highlight four areas: ensuring better health facilities for Covid-19 patients; boosting social safety net programmes for poor, new poor and marginalised people; raising allocation for employment-enhancing infrastructure development projects; and supporting agriculture, SMEs and export-oriented industries because of their recovery and thereby keeping the prevailing jobs.
Through the second lockdown, the sufferings of the indegent and marginal people have further accentuated, it said.
According to the think-tank, instead of setting ambitious targets which may miss the twelve-monthly target by a substantial margin by the finish of the fiscal year, the goals for income mobilisation should be occur a realistic manner taking cognisance of the potential shortfall in FY21.
Immediate term readjustments in tax provisions ought to be made considering the urgency of both addressing the risks and mitigation of the vulnerabilities. So that you can extend support to monetary recovery over the medium term, persuasion of fiscal policy should be manufactured in a judicious manner.
The report said as introducing new taxes or raising tax rates might be difficult, more emphasis should be directed at the enforcement of tax measures and curbing tax evasion.
The CPD reiterated its earlier proposals to initiate wealth and property tax in Bangladesh.
"Introduction of an inheritance tax, informed by global best practices, may also be considered."
The urgency of improving the implementation capacity of the relevant ministries and departments related to the health sector can not be overemphasised.
CPD Executive Director Fahmida Khatun called for a universal social security technique to ensure social protection.
"A national strategy on social safety was formulated, nonetheless it had not been implemented. Had the strategy been implemented, it could have been possible to solve these problems easily by identifying the lower-income people."
CPD Research Director Khondaker Golam Moazzem said the federal government had several programmes in the social security sector, but not everyone could be covered.
There are non-governmental organisations that will work on these issues. With their help, the indegent people need to be brought under the programmes, he said.
Source: www.thedailystar.net
