The global anti-poverty lender World Bank Thursday said the black money whitening facilities in the proposed Bangladesh budget are ‘immoral’ and unlikely to boost revenue earnings if the past experience is taken into account.
“Since 1976, the governments have given opportunity of legalising the black or undisclosed money nine times,” World Bank senior economist Zahid Hussain told a briefing in the city.
“But only Tk 180 billion was whitened after the payment of Tk14.20 billion as taxes. Out of the legalised money, over 50 per cent were whitened in the last two years of the caretaker government when there was no amnesty on the whitening schemes,” he said.
Hussain said if the country’s past experience were taken into account, the latest whitening facilities would also fail to boost tax revenues in the upcoming 2009-10 fiscal year.
“I don’t have the appropriate answer –how the money legalisation provision could be fruitful for Bangladesh. When there was no amnesty, the money legalisation rate was high, but when the amnesty was not there, the rate was low,” Hussain said.
The World Bank economist echoed local economists in describing the controversial money whitening facilities as “morally wrong”.
“This is immoral and the honest taxpayers will feel deprived due to the reduced tax rate for undisclosed money holders,” he told a post-budget briefing of the WB.
Hussain said the money whitening provision needs more clarification as in the present form it conflicts with government’s anti-money laundering laws and some other national and international laws and treaties.
He termed the proposed budget “expansionary, innovative and protectionist”, saying the country needs to increase spending to ride out the downside risk on its growth, stemmed from the global economic crisis.
“But its effectiveness will depend on the quality and quantity of actual spending,” he said.
The budget has provisions for public-private partnership (PPP) for infrastructure development, a major cut on ‘un-smart’ subsidies and expansion of spending for rural development and for reducing regional disparity, he said.
Hussain also backed what he called a “protectionist” budget, saying the average nominal protection has risen to 22.9 per cent in the next fiscal year, up from 20.1 per cent in FY09.
“The budget has offered generous protection to the import-substituting local industries. But about 70 per cent of the industries have been getting the facility for many years. It will benefit the industries but hurt the consumers,” he added.
He appreciated the Tk50 billion ‘unspecified’ stimulus package. “It is a smarter approach by the government as it would need further assessment to determine which sectors have been affected badly by the global economic downturn.”
The WB economist warned that the revenue growth would pose the most serious challenge to the government.
“In the past, revenue collection grew by one or two percentage points in excess of the nominal GDP growth. But revenue growth target in the next budget is 3.2 percentage points higher than the projected nominal GDP growth.”
Hussain said inefficiency of the project implementing agencies could affect the Tk 305 billion annual development programme (ADP), described as ambitious by some local economists.
The government should strengthen monitoring the project works of its top 10 ministries and divisions, which together spend 78 per cent of the total ADP outlay, he said.
“Frequent transfer of officials is another key reason for the poor project implementation,” he said, and added that most of the project directors do not know the procurement rules, which also delay government purchases.
He criticised the oft-used government practice of cutting ADP expenditure to reduce budget deficit, saying if efficient execution of development projects takes the deficit to five to six per cent of the Gross Domestic Product, it would be better for the economy.
The outgoing country director of the WB Xian Zhu said the Bangladesh’s budget for FY10 has broadly captured the promises made in the government’s election manifesto.
“Given Bangladesh’s sound macroeconomic position and the looming threat of the impact of the global economic recession, the government is right to emphasize an expansion in public spending,” Mr. Zhu told reporters in his last working day in Dhaka office.
Source: Financial Express
