Friday, July 20, 2018 | ePaper
The ignored middle income group
Many a criticism hovering around FY 2019 budget has been leveled against its anti-middle class stand. It does mean this fiscal year budget is for those who amassed huge resources by direct or indirect corruption. According to a report:
Analysis of this year's budget by experts and the media does not give the sense of optimism to ordinary citizens as expressed in the Finance Minister's budget address. This is because it has not addressed some of the major challenges that impede real economic growth and development. On the contrary, the budget seems to have made major concessions to defaulting sectors while providing very little relief to the fixed income middle class and lower income groups. The biggest challenge, moreover, is how the government will finance this huge budget in the wake of an abysmal rate of ADP implementation and a poor rate of revenue growth.Experts have called the budget unrealistic and maintaining the status quo which is hardly encouraging for the public plagued by soaring inflation, deteriorating quality of healthcare, education and other public services. Corporate tax for listed and non-listed banks and insurance companies have been cut which seems quite illogical as it will only benefit the owners of these institutions with no affect on depositors or borrowers. This is especially jarring in the backdrop of the major crisis in the financial sector riddled with nonperforming loans, liquidity crisis and corruption scandals. Meanwhile the income tax ceiling of Tk 2.5 lakh has not been raised hence real income of people, which has dwindled due to inflation, has not been protected. In addition VAT on smaller apartments has been raised while on larger ones reduced which defies logic as it will only make it less affordable for lower income groups to buy a flat and cheaper for higher income groups.Although the government has placed great emphasis on mega projects with a budget allocation of Tk 32,555 crore to speed up implementation, especially before the elections, the track record has not been good. Inefficiency, corruption and negligence of project officials have caused inordinate delays in implementation, hiking up the cost of projects even more.
We have pointed finger at our pound-foolish policymakers. They do not bother to think of the 'voices of the middle-class and the lower middle income people to the extent they feel necessary to pay attention to the affluent class for election'. Finance Minister AMA Muhith prepared a budget of Tk 464,573 crore This nothing but maintaining status quo -- a continuation of the existing tax-free income ceiling and tax rates for individuals and companies.'
CPD distinguished fellow thus commented: "The middle- and lower middle-class have a relation with the market. For this reason, the rise in indirect tax by way of VAT will create a burden on the shoulders of these people."Debapriya of CPD said "We are giving benefits to low income people by increasing the social safety net coverage. At the same time, we are giving benefits to those who provide finance for election." VAT rates on goods and services, including advance trade VAT at the import and trading stages from 4 percent to 5 percent, will increase prices and thereby inflation-all to the detriment of the middle income consumers.
Inflation is likely to rise in the incoming fiscal year to affect the middle-income group "The anticipated food and non-food price pressure will fall disproportionately on the low income people and worsen the consumption and income inequality situation."
Some stated criticism has been given below
'A large number of lower middle income people will come under the tax net for the first time next fiscal year as the tax-free income limit has been kept unchanged for the fourth year now -- without considering the added pressure of rising food inflation and decreasing average monthly real wage.'The tax-free income threshold should be increased to Tk 300,000 and the first slab of tax rate should be fixed at 7.5 percent instead of 10 percent to ease the pressure on the lower middle income families, the CPD said.The civil society organisation opposed the government's move to lower the corporate tax rate for banks, insurance and financial institutions, saying the cuts will give the 'opposite signal' to the sector plagued by loan scams, high default loans, liquidity crunch and a complete lack of good governance.The government should not give such facility to the owners of banks and financial institutions without stopping the anarchy that is going in the banking sector,.He went to state that the corporate tax cut is unlikely to improve the liquidity situation and lower the interest rate for lending, both of which would have benefitted the entrepreneurs.
The middle-income group coming under taxation net will have no leg to stand in the midst of inflation and massive corruption. The budget for the fiscal year 2018-19, if not drastically rectified through parliamentary discourse, 'would allow corruption in development projects, intensify liquidity crisis in the financial institutions and push the poor people into economic hardship.' The fixed income groups would be victim of the this budget friendly to the bank owners and unscrupulous merchants.
(Dr. M Abul Kashem Mozumder, Pro-VC, BUP and Dr. Md. Shairul Mashreque, Retired Professor, Chittagong University).