Save for a slash in income tax, there is no respite in this year’s budget for the penny-pinching middle class. Their expenditures will continue going up even as the global pandemic and resulting recession hits their incomes and slashes their jobs.
This January, two things happened for Nabil*. He got married and started a new job as a merchandiser at a large apparel company. This wasn’t his first job — he has five years’ professional experience and holds a graduate degree in the field.
Three months later, he — along with dozens of others — was terminated as the apparel company downsized amid shrinking global demands.
While the number of people who have become unemployed due to the pandemic is unavailable for Bangladesh, globally the number is one in six young people, according to the International Labour Organisation.
“Please don’t use my real name. I’m newly married and I haven’t told my in-laws that I’m unemployed already. Whatever savings I had, I spent it all on my wedding, knowing that I had a better paying job this year,” he said.
“Then the pandemic happened. I am now 30 years old and relying on my father financially. My younger siblings are both students, and my father is the only earner once again, for our family of six.”
And so, Nabil’s aging father — who is smack in the middle of the age group most at risk for contracting coronavirus — has to go out to work and support the family.
One silver lining for middle-class families is that the income tax exempt threshold has been raised to Tk 3 lakh for the next fiscal year, and the rates of taxation for the first three slabs have been set at five, 10 and 15 percent — down from 10, 15 and 20 percent respectively.
As the government targets the ultra poor with stipends and cash transfers, there is nothing for those like Nabil’s family during an unprecedented crisis. No unemployment benefit scheme like that in the United States, no house rent assistance like in the United Kingdom, no universal basic income scheme like in Hong Kong.
Small businessmen in rural areas will get microloans and high school graduates will receive employment training under the Skills for Employment Investment Program — but service-providing professionals hit by the pandemic are left out.
It seems as if middle-class families like Nabil’s are being told — we have nothing to give, but we’ll be taking less of what you earn.
In addition, those with personal cars will now have to pay 15 percent (up from 10) in duties for services by the Bangladesh Road Transport Authority.
Nor is there any reduction in Value Added Tax (VAT) of significant consumer goods like infant milk and oil that were hiked last year.
As the Finance Minister AHM Mustafa Kamal himself stated in his budget speech, “Although a large section of our population can afford to pay taxes, the number of taxpayers is only 20-22 lakh.”
He also said, “VAT is the largest contributor to the NBR [National Board of Revenue] tax revenue.”
Meaning, while the government fails to crack down on tax evasion by the rich, the economy will be bankrolled by the middle class and even the low-income population.
This comes in a year when consumption inequality, measured by the Gini coefficient, is 0.35 — up from 0.32 in 2016 — according to the Centre for Policy Dialogue’s latest review of the economy.
Last month, Mosammat Sumaiya, who runs a business doing house-calls for beauty services, had to depend on relief for the first time in her adult life.
The single mother could not bear the thought of running after relief trucks, and had been reaching out to people she knew to connect her with donors personally. She received a month’s worth of food supplies from a charitable organisation.
“I used to earn around Tk 25,000 per month but since the pandemic, nobody wants to avail salon services because of social distancing guidelines,” said Sumaiya.
On a lighter note, locally produced potato chips will be cheaper with the VAT reduced from 15 percent to 10, so the middle class can at least eat their feelings.