DHAKA, June 11, 2020 (BSS) – Finance Minister AHM Mustafa Kamal today placed a Taka 5,68,000 crore national budget for fiscal year (FY21) at the Jatiya Sangsad with a target of attaining 8.2 percent GDP growth through continuing the momentum of the economy with all required economic activities after tackling the impacts of the coronavirus (COVID-19) pandemic.
Leader of the House and Prime Minister Sheikh Hasina along with a number of selected lawmakers, invited by the concerned whips of the JS, joined the sitting.
The finance minister started delivering his budget speech at 03.03 pm, being asked by Speaker Dr Shirin Sharmin Chaudhury. Most parts of his 130-page speech were presented through video and his speech lasted for about 45 minutes before the session was adjourned.
While placing the budget, the finance minister said in FY 2020-21, the size of the total expenditure or budget has been estimated at Tk. 5,68,000 crore, which is 17.9 percent of GDP.
“Total allocation for operating and other expenditures is estimated at Tk 3,62,855 crore, while the allocation for the annual development program (ADP) is Tk. 2,05,145 crore. ” he added.
The finance minister dubbed the proposed budget as “Economic Transition and Pathway to Progress”.
Regarding the current coronavirus crisis, Kamal said, “This is not the time to showcase our achievements. Rather it is time to steer the nation ahead having our people at our side and effectively tackling the crisis arising from the deadly attack of coronavirus through our pragmatic and efficient plans. I sincerely thank our Hon’ble Prime Minister for her unrelenting efforts to continue this task.”
While concluding his budget speech, he said, “At this criticial juncture in the wake of the outbreak of COVID-19 pandemic, our topmost priority is to save people from being infected by the virus. At the same time, it is incumbent on us to maintain the momentum of the economy to ensure the provision of food and clothing for the people.”
In the current situation, Prime Minister Sheikh Hasina herself is reaching out to all segments of the population to keep their trust and morale high and unwavered, he added.
“She (PM) firmly believes that life moves on, does not stop in its course. This budget, formulated at the directives of Hon’ble Prime Minister, will be our tool as we move towards overcoming economic recession and establishing the foundation for desired economic success in the future in continuation of past development,” Kamal said.
This is the country’s 49th budget and the 21st of the Awami League (AL) government in five terms while Tajuddin Ahmed presented the first budget as the finance minister of the post-independence Bangabandhu Government in 1972.
Kamal placed his second budget today as the country’s 12th finance minister after he was entrusted with the portfolio in the third consecutive term of AL government.
AMA Muhith and M Saifur Rahman presented the highest 12 budgets each at different terms of their respective governments.
Muhith, however, was the lone finance minister to place budgets for 10 consecutive fiscals since 2009 until he went on retirement after the end of last parliament.
Earlier on the day, the cabinet in a special meeting, with Prime Minister Sheikh Hasina in the chair in the Jatiya Sangsad Bhaban cabinet room, approved the proposed budget for the coming financial year.
The finance minister said although the GDP grew consistently at an increasing rate in the last decade, the GDP growth rate of the current fiscal year has been revised downward at 5.2 percent due to the fall in exports and lower than expected growth in remittances as a result of long and sustained worldwide lockdowns arising from the impact of COVID- 19.
“However, in view of the post-Covid recovery, the growth rate is projected at 8.2 percent for FY 2020-21 in line with the long-term plans. We expect that inflation will be 5.4 percent during the period,” he said.
The total budget size in the current fiscal year was earlier estimated at Tk. 5,23,190 crore. In the revised budget, the expenditure was reduced by Tk. 21,613 crore, and thus revised at Tk. 5,01,577 crore.
Bearing in mind the realities at hand and planned reforms in revenue management, the government set the target of total revenue income in the fiscal year 2020-21 at Tk. 3,78,000 crore. Out of this, Tk. 3,30,000 crore will be collected through the NBR. Tax revenue from non-NBR sources has been estimated at Tk. 15,000 crore, while the non-tax revenue is estimated to be Tk. 33,000 crore, he continued.
He said the overall budget deficit has been estimated at Tk. 190,000 crore, which is 6.0 percent of GDP up from 5.0 percent in the last fiscal year. Out of the total deficit, Tk. 80,017 crore will be financed from external sources, while Tk. 1,09,983 crore from domestic sources of which Tk. 84,983 crore will come from the banking system and Tk. 25,000 crore from savings certificates and other non-bank sources.
The finance minister in his budget speech said allocation proposed for the social infrastructure sector in the proposed budget is Tk. 1,55,536 crore, which is 27.38 percent of total allocation, in which allocation for human resource sector (education, health and other related sectors) will be Tk. 1,40,222 crore.
Besides, Allocation proposed for the physical infrastructure sector will be Tk. 1,67,011 crore or 29.40 percent, in which Tk. 69,553 crore will go to overall agricultural and rural development, Tk. 61,435 crore to overall communications, and Tk. 26,758 crore to power and energy. A total Tk. 1,40,265 crore has been proposed for general services, which is 24.69 percent of the total allocation.
The finance minister proposed an amount of Taka 36,610 crore for public-private partnerships (PPP), financial assistance to different industries, subsidies and equity investments in nationalized corporations, banks, and financial institutions, which is 6.45 percent of the total allocation.
As per the ministry and division wise allocation, the Local Government Division received a proposed budgetary allocation of Taka 36,103 crore, followed by Taka 22,883 crore to the Health Services Division alongside Taka 6,362 crore to the Ministry of Health and Family Welfare, Taka 29,442 crore to the Road Transport and Highways Division, Taka 24,853 crore to the Power Division, Taka 15,442 crore to the Ministry of Agriculture, Taka 33,118 crore to Secondary and Higher Education Division, Taka 24,937 crore to the Ministry of Primary and Mass Education, Taka 34,842 crore to the Ministry of Defense.
Terming the year 2020 as very important in national life, Kamal said the Birth Centenary of Bangabandhu Sheikh Mujibur Rahman, the greatest Bengali of all times, is being celebrated this year.
But, he said, most of the programmes scheduled to celebrate the Mujib-Borsho have been rearranged to avoid mass gathering during this COVID-19 pandemic and instead being organised through digital means. The celebration will continue up to 17th March 2021.
Amidst this unprecedented global crisis of COVID-19, he said, Prime Minister has announced a number of stimulus packages totaling over Tk. 1 lakh crore to stand by the poor and helpless people, keep the momentum in economic activities, and bring back the trend in growth and development.
“These are akin to the bold steps she took to save the country during the Asian Financial Crisis in 1997 and the Global Recession in 2009. The fiscal and financial packages announced by the hon’ble Prime Minister are equivalent to 3.7 percent of GDP, which is the largest in the South Asia region,” he said.
The finance minister said since the beginning of the COVID-19 pandemic, the government has taken various steps to combat its fallout. “We have taken a comprehensive plan to overcome the possible negative impacts of pandemic on our economy and people. Under this plan, we have taken measures that were necessary in the immediate term and we are implementing some in medium term. We have also taken up a range of initiatives that will be implemented in longer term to achieve full economic recovery.”
He said in light of the comprehensive plan and strategies described above, the government has declared a number of stimulus packages to support the emergency healthcare services, to protect jobs and to achieve smooth economic recovery. The economic recovery packages declared so far has totaled Tk. 1,03,117 crore.
The finance minister said the government has started implementing the VAT Act, 2012 and to make it a success, activities such as increasing required manpower, procuring necessary equipment, and enhancing capacity of officials will continue in the coming fiscal year 2020-21.
“The largest portion of government revenue is collected through the different outfits of the National Board of Revenue (NBR). Therefore, necessary steps to enhance the institutional capacity of the NBR will continue in the next fiscal year.”
Highlighting the importance of the health sector in the budget, Kamal said, “We have taken all out measures to improve the health sector. To combat the COVID-19 pandemic, we are implementing different progrms worth Tk. 5,500 crore under the Health Services Division. The government will do whatever is required to be done to address the pandemic.”
To fulfill emergency requirements, Kamal proposed to allocate Tk. 10,000 crore as lump sum.
He also proposed to form an ‘Integrated Health-Science Research and Development Fund’ of Tk. 100 crore to finance the activities for the development of research in health-education and science and technology.
A high-powered committee consisting of experienced researchers in the health sector, nutritionists, public health experts, sociologists, economists, environmentalists, civil society and other suitable representatives will be formed to manage this Fund efficiently and effectively.
In the agricultural sector, various steps will be needed in production, marketing and different other areas to tackle the imminent challenge of food scarcity, Kamal said, adding that Prime Minister has given directives to ensure that not even an inch of land is left without farming so as to ward off any possibility of food scarcity in the aftermath of COVID-19.
Highlighting the features of the social safety net programmes, he said government has allocated Tk 95,574 crore in the social safety net programmes, which is 16.83 percent of total budget and 3.01 percent of GDP in FY 2020-21. In last year’s revised budget, the allocation was Tk. 81,865 crore.
“We have been increasing the allocation in the social security sector every year to improve the lives of the poor. By now, about one-fourth of families in the country have been brought under the social security programme,” Kamal said in his budget speech.
He said all poor senior citizens in 100 upazilas, most prone to poverty due to the coronavirus outbreak, will be brought under the old age allowance as per the existing policy. This will add 5 lakh new beneficiaries, and an additional allocation of Tk. 300 crore will be provided to this programme.
Besides, all widows and women deserted by their husbands in 100 upazilas, most prone to poverty due to the coronavirus outbreak, will be brought under the coverage of the allowance programme for widows and women deserted by their husbands as per the existing policy, Kamal said.
This will add 3.50 lakh new beneficiaries, and an additional allocation of Tk. 210 crore will be provided to this programme, he said, adding that the number of beneficiaries of the allowance for insolvent persons with disabilities will be increased to 18 lakh following the latest disability identification survey and this will add 2.55 lakh new beneficiaries, and an additional allocation of Tk. 229.50 crore will be required for this purpose.
The finance minister said it is expected that the readymade garment (RMG) industry will see a rebound with the support from the stimulus package being offered by the government to counter the COVID-19 pandemic, and that export will return to the desired positive trend in FY2020-21.
For this, he proposed to continue with this additional export incentive of 1 percent in the next fiscal year in addition to the other existing incentives.
Considering the financial ability of the taxpayers under the current scenario of COVID-19, and also as a gift of the ‘Mujib Borsho’, the finance minister proposed to increase the tax-free income threshold and reduce the tax rate applicable for the taxpayers other than companies and local authorities, especially the individual taxpayers.
He said this reduction of tax burden will hopefully add some comfort to the lives of the individual taxpayers, and will also make them feel encouraged to pay taxes regularly.
“I, therefore, propose to increase the tax-free income threshold of male taxpayers from Tk. 2.50 lakh to Tk. 3 lakh and the tax-free income threshold of female taxpayers and taxpayers above 65 years of age from Tk. 3 lakh to Tk. 3.50 lakh respectively,” he added.
At the same time, he proposed to reduce the minimum tax rate for individuals from 10 percent to 5 percent, and the maximum tax rate for individuals from 30 percent to 25 percent.
To popularise the option of online payment of taxes and online submission of tax return among the taxpayers, Kamal also proposed a tax rebate of Tk. 2,000 to all the taxpayers who will file their income tax returns online for the first time.
To ease the tax burden at this critical time of the COVID-19 pandemic on valued taxpayers for publicly traded companies and non-publicly traded companies except for banks, leasing and insurance companies, mobile phone companies and cigarette manufacturers, Kamal proposed a 2.5 percent reduction in the tax rate of non- publicly traded companies to fix it at 32.5 percent from that of 35 percent.
He said at present, the RMG factories having green building certification enjoy a special tax rate of 10 percent, whereas RMG factories without such certification pay taxes at a rate of 12 percent.
Since the deadline of the SRO providing this special tax rate ends on June 30, 2020, Kamal proposed to extend the time-limit of the said SRO by another two years.
“I hope our taxpayers in the RMG sector will be greatly benefitted from this tax rate reduction. I propose to amend the Ordinance to fix the rate of withholding tax on all sorts of export proceeds including that of RMG at 0.5 percent instead of the existing rate of 1 percent,” he added.
In order to provide an opportunity for the taxpayers to amend their mistakes due to lack of knowledge as well as to pave the way to increase the flow of money into the mainstream economy, the finance minister proposed to insert two tax incentive sections in the Income Tax Ordinance.
Firstly, regardless of the provisions of any other prevailing law of the land, he said, individual taxpayers will be allowed to disclose any type of undisclosed house property including land, building, flat, and apartment between July 1, 2020 and June 30, 2021 on paying tax at a particular rate on per square meter of the said asset.
Besides, Individual taxpayers will also be able to make any disclosure of undisclosed cash, bank deposits, savings certificates (Sanchayapatra), shares, bonds or any other securities between 1st July 2020 and 30th June 2021 on paying taxes at a rate of 10 percent on the value of the said declaration; and no authority including the income tax authority can raise any question on such declarations.
Secondly, with a view to providing impetus to the stock market, a major hub of economic activity of the country, individual taxpayers can invest money in the capital market between 1st July 2020 and 30th June 2021 and show it in their tax returns on paying tax at a rate of 10 percent on the value of the investment subject to satisfying certain conditions including a lock-in period of three years, and no other authority including the income tax authority will raise any question in this regard.
“When comes into force, these provisions will increase the flow of money into the mainstream economy, generate employment and enhance collection of tax revenue,” the finance minister said.
To put a rein on tendencies of money laundering and tax evasion through under-invoicing, over-invoicing, and declaration of false investments, Kamal proposed to insert a new section in the Income Tax Ordinance.
According to the proposed provision, he said, 50 percent tax will be levied on the proven amount of over- or under-invoicing, or on the proven amount of false declaration of investment.
“I hope that the proposed provisions will be highly effective in curbing money laundering and tax evasion caused through acts of under-invoicing, over-invoicing, and false declaration of investment,” he added.
The finance minister also proposed to continue the existing VAT exemption facility in the cases of government’s priority and fast track projects, such as Rooppur Nuclear Power plant Project, High Tech Parks, Economic Zones and the Public-Private Partnership (PPP) projects. “In addition, for the growth and development of domestic industry and export sector, I also propose to continue existing VAT and supplementary duty exemptions provided to the industries like automobiles, refrigerators, freezers, air conditioners, mobile industries, etc.”
Mentioning the high growth projection of 9.5 percent in the next fiscal by IMF, Kamal said the vast darkness that has shrouded the country will certainly go away one day.
Imbued with the spirit of the War of Liberation and under the bold leadership of Prime Minister Sheikh Hasina, Kamal said, “We as a nation, with the support and cooperation from all, will also emerge victorious in the fight against the COVID-19 pandemic, InshaAllah. We shall have to overcome the situation with patience and bravery without being distracted and panicked at this critical moment.”
Before concluding his budget speech, the finance minister quoted some verses from Surah Al Baqarah of the Holy Quran.