Bangladesh President Iajuddin Ahmed approved the country's 2008/09 budget on Monday, aiming to reduce poverty and halt a rise in inflation while at the same time adjusting tariffs in a bid to support domestic industry. The country's top tax official said such adjustments would cause up to $175 million in lost revenues, but he believed the losses could be made up through busting and motivating tax dodgers.
The president signed off the budget a day after the council of advisers (ministers) approved the fiscal proposals for the year beginning on Tuesday, officials said. Mirza Azizul Islam, the government's finance and planning adviser (minister), announced on June 9 a budget for the year starting in July of nearly 1 trillion taka ($14.6 billion), including a development outlay of 256 billion taka.
Azizul told Reuters on Monday that the detail included "several changes in tariff structure to help grow the home industry". For example, a proposed 3 percent import duty on aircraft engines and parts, down from 10 percent in the current budget, has been dropped altogether.
"The purpose to allow zero tariff ... is to help the growing aviation business in the private sector," Azizul said. The value-added tax on certain children's books has been reduced to 7 percent from 15 percent, and import duty on these items has been increased to 25 percent from a proposed 10 percent. The import duty on printed and writing paper has been doubled to 25 percent.
"These measures were taken only to protect the local paper industry," Azizul said. A proposed 35 percent supplementary duty on satellite TV programme distributors has been reduced to 25 percent, the budget statement said. "The budget has two big challenges," Azizul said. "They are to collect revenues as per targets and to implement the budget properly." The economic growth target in the budget is 6.5 percent.
That compares with the 6.2 percent target for the 2007/08 fiscal year, when inflation shot up to 10 percent, mainly due to soaring food prices. Azizul said he hoped inflation would average around 9 percent in fiscal 2008/09 starting on Tuesday.
The government is also making an effort to ease the tax bill for individuals and increase social benefits for some groups. The tax-free individual income limit has been raised by 10 percent to 165,000 taka, with the tax-free income threshold for women, elderly citizens above 70 years of age and the disabled also rising by nearly 10 percent to 180,000 taka.
A monthly honorarium for veterans of Bangladesh's 1971 independence war has been raised by 20 percent to 900 taka. Economists gave mixed reactions on the budget, with some saying that the interim government, which took charge in January 2007, made little effort to contain inflation in the past year. "We urged the government to take compensatory measures to control food inflation, but it was not addressed," said Atiur Rahman, a professor of development studies at the Dhaka University.
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