Another anti-poor advice from World Bank

Editorial, NewAge, October 8, 2007. Dhaka, Bangladesh

The World Bank has once again made an anti-people recommendation, urging the government to increase the coverage of its value added tax, as reported in New Age on Sunday. We have iterated in these columns several times that value added tax is a means of increasing the exchequer’s revenue by burdening general consumers and people at large. Even in its current state, without increasing the coverage of indirect taxes, the current military-driven interim government expects to generate 36 per cent of its tax revenue from value added taxes and only 24 per cent from income tax and corporate profits.

Such basic utilities as water supply were put under the VAT coverage in the budget ignoring the people’s basic right to this essential service. The World Bank has now upped the ante further by recommending that a number of small commercial establishments serving the poorer sections of the populace, which are currently exempted from its coverage, be included. Such a decision, as the report states quoting economists, will further increase the already exorbitant cost of living for the poor people as they will be made to bear the brunt of an increased VAT coverage.

Imposing taxes on such basic and essential services such as education and health services must not be included in the VAT net as it would not only be in violation of the state’s moral and constitutional responsibility to ensure education and health for the citizens but also penalise the common man for seeking education and health services. Inclusion of the small commercial establishments in the VAT net would also imply further burden for the people who do not have adequate sources of income at the moment, given high unemployment, high prices of essentials and economic stagnation in general. This would force a bulk of these people to earn that extra cost through unfair means which would be essentially self-defeating to the incumbents’ proclaimed agenda of eliminating corruption. This move we must stress would only entrench corruption further. Understandably, such recommendations stem from the World Bank’s pathetically anti-people stance and diabolical apathy to reduce disparity and, therefore, must be ignored by the incumbents.

We urge that basic services of the state be entirely removed from the VAT coverage to ensure better access and affordability of the people. Instead, the incumbents should concentrate on streamlining income tax and corporate tax to attain better redistribution of resources and at the same time strengthen its collection and monitoring of commercial establishments that collect indirect taxes from the consumers but do not pay the amount to the exchequer.

The Bretton Woods institutions – the World Bank and the International Monetary Fund –are rightly faced with a worldwide crisis for credibility and legitimacy of their operations. Several countries have bidden farewell to both the institutions and have embarked on a path to meaningful development and more equitable economic prosperity. Furthermore, given the increasing indebtedness of Bangladesh, we urge the incumbents to seriously reconsider their engagement with the international financial institutions.

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