Loan scam grips one bank after another and the overall financial sector mainly because of a lack of political will to address the problem, said the Centre for Policy Dialogue yesterday.
Now the first generation banks have started to get affected by loan scandals after state-owned banks and the new ones.
And the reason behind the repeated incidents is the absence of good governance and a lack of oversight on banks, said CPD Distinguished Fellow Debapriya Bhattacharya at a media briefing held at the Brac Centre Inn.
The private think-tank organised the meet to share its observations on the budget for fiscal 2017-18.
“Such incidents would not take place if there was a political will.”
The CPD once again called for a temporary financial sector commission to suggest and implement reforms.
“The finance minister also mentioned the banking commission in his budget speech and on several occasions before. But we have seen that it losses steam somewhere,” Bhattacharya said.
People will be benefitted and satisfied if a reform commission is formed based on a transparent process ahead of the general election, he added.
Citing the past trends for budget implementation, revenue collection and budget deficit, the CPD said Tk 360,266 crore out of the total outlay of Tk 400,266 crore can be spent, meaning 90 percent of the budget can be implemented. In the worst case scenario, Tk 340,266 crore of the budget would be implemented, said the CPD.
The think-tank forecasted a revenue shortfall between Tk 43,000 crore and Tk 55,000 crore. The budgetary target for revenue collection is Tk 287,990 crore.
“The possible revenue shortfall could be significant, but its extent will depend on the ability to deliver public expenditure plan. Nevertheless, the government will need to put utmost emphasis on mobilising resources from both NBR and non-NBR sources.”
The inability to implement the new VAT and SD Act for another two years will have serious consequences for fiscal framework, particularly for revenue mobilisation.
The think-tank suggested continuation of digitisation of the VAT process and bringing in more businesses through the implementation of the VAT online project under the existing VAT Act 1991.
The move would prepare a high number of firms to comply with the new law once it comes into effect. “The new VAT law has made a crash landing. So, schemes for automation of the VAT system through VAT online project should be continued to salvage it,” Bhattacharya said.
The implementation of the law has been deferred at the last moment as there was a lack of political, social and technical preparation, he said, adding that the CPD supports the new VAT law.
The new law seeks a single and uniform VAT rate of 15 percent for most goods and services available in the country. The CPD said the lowering of the single VAT rate to 12 percent would reduce the worries of people.CPD Research Fellow Towfiqul Islam Khan suggested the revenue authority set a timeline to introduce electronically generated 9-digit Business Identification Number. The 9-digit e-BINs are issued under the new law.
CPD Executive Director Fahmida Khatun said the organisation supports a revenue system that ensures accountability and transparency in tax collection and expand the tax base.
To implement the budget for fiscal 2017-18, the CPD recommended that the government should prepare a work plan based on new circumstances while considering the objectives of maintaining macroeconomic stability, supporting private investment and generating more employment.
It suggested involving the parliamentary standing committees to prepare the work plan. A cabinet sub-committee may scrutinise and endorse the work plan and oversee implementation, Bhattacharya said.
The CPD recommended widening the income tax base, citing its findings that only 27.3 percent of all potential income taxpayers declared income tax in 2010.
It also called for more stringent measures to reduce illicit financial outflows and actions against proven cases.
“Motivation of honest taxpayers erodes if the government does not take action against people making money illegally and sending them abroad,” Bhattacharya said.
On one hand, increasing amounts of funds are transferred abroad and on the other, the tax burden is being increased on legally earning taxpayers. “It is not morally acceptable.” Increased attention should be given to curb unlawful outflow of capital as it intensifies ahead of national election, he said.
Replying to questions on the sluggish growth of exports, falling remittance and achievement of Sustainable Development Goals, CPD Distinguished Fellow Mustafizur Rahman stressed taking reform measures. He suggested increasing productivity and competitiveness, and diversification of exports to attain higher export growth. “Bangladesh has to ensure productivity-driven growth,” he added.
CPD Research Director Khondaker Golam Moazzem said declining remittance inflows may affect consumption spending in the domestic market.
Source: The Daily Star