FISCAL POLICY AND FISCAL MANAGEMENT
[Fiscal policy determines the level of public revenue and public expenditure and directs the measures required to maintain balance between the two. Formulation and implementation of a sound fiscal policy is one of the most important functions of the government. It lays emphasis on maintaining macroeconomic stability through harmonizing public expenditure management. Sound fiscal policy is also fundamental to fostering economic growth. Currently, a number of reform programmes are in progress to update and streamline public expenditure and revenue management. These reform programmes have a direct bearing on the outcome of fiscal policy.There is no alternative to sound fiscal management in overall economic governance as a well- balanced public income and expenditure regime assures the private sector a stable macroeconomic environment.]
The main source of government revenue is tax revenue. Public revenue principally consists of direct and indirect taxes and they account for more than 80 percent of the total receipts. The rest comes from different non-tax collections such as fees, charges, tolls etc. The level of revenue speaks of the stage of economic development of a country. In FY 2001-02, revenue-GDP ratio was 10.2 percent, which slowly rose to 10.79 percent in FY2005-06. But it slid down slightly to 10.58 in FY 2006-07. In FY 2007-08, revenue collection stood at 11.17 percent of GDP. Then on the rising trend in revenue collection continued and it rose 12.1 percent in FY2010-11. Table 4.1 below shows tax and non-tax revenue receipts and tax-GDP ratio during the period from FY2001-02 to FY2010-11. Table 4.1: Revenue Receipts
(In Crore Taka)
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
As percentage of Gross Domestic Product (GDP)
Source: National Board of Revenue, Finance Division and BBS. Figures are based on revised budget.
National Board of Revenue (NBR) under the Internal Resource Division is dispensing with the twin responsibilities of formulation of tax policy and its implementation. During FY 2010-11, various steps
were taken to rationalise direct and indirect taxes with an aim to mobilize adequate domestic resources for investing in infrastructure development. This will help attain higher growth to reduce poverty at a faster rate, achieve self sufficiency in food production and ensure food security, expand export-oriented industries, develop domestic industries, enhance industrial productivity and create employment opportunities (Box 4.1)
Box 4.1: Measures under Direct and Indirect Tax System for FY 2010-11 Measures under Direct Tax system
Tax exemption limit for individual taxpayer has been raised to Tk 1, 80,000 from Tk. 1, 65,000.
The exemption limit for female taxpayers and senior citizens of 65 years and above has been enhanced to Tk 2,00,000 from Tk. 1,80,000 and for the retarded persons it has been enhanced from Tk 2,50,000 from Tk. 2,00,000
Tax rates remain unchanged at 37.5 percent for private limited companies and at 27.5 percent for public limited companies. However, tax rate has been reduced to 42.5 percent from 45 percent for bank, insurance and financial institutions. Tax rate for Mobile Phone Operators remains...
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