Aligning Fiscal Year with Agricultural Cycle

The recent initiative by the government to align the fiscal year with the agricultural and climatic cycles of Bangladesh is undoubtedly praiseworthy. This will be effective from the 2028-29 (1 April to 31 March) fiscal year, with 2027-28 (1 July to 31 March) acting as the transition period. As is well-known, the period referred to by governments all over the world for accounting cum budgeting purposes is called a fiscal, financial or budget year. It is the accounting period used by governments for budgeting, accounts-keeping and taxation. Varying across countries, the period is also used for financial reporting by businesses and other organisations. Laws in general do not necessarily require a fiscal year to be the same as the calendar year.
In Bangladesh, the practice has traditionally been to consider the July-June period as the fiscal year in line with the norm set during the Pakistani era. The Indians, on the other hand, have upheld the British colonial heritage of the April-March fiscal year that was first introduced way back in 1867. The British adopted this in order to conform the accounting and budgeting practices with that of imperial Britain. Before that, the financial year in the Indian subcontinent used to commence from 1 May and concluded on 30 April of the next calendar year.
Since independence in 1971, Bangladesh has failed to amend or correct many inherited practices in line with the realities on the ground. Interestingly, even in South Asia, Pakistan has been the only other country apart from Bangladesh to stick to the July-June fiscal year. In the USA, for example, the fiscal year starts in October. Many countries like Austria, Brazil, China, Portugal, Russia, South Korea, Spain and Sweden adhere to the January-December financial year. On the other hand, some countries like Afghanistan, Nepal, Ethiopia and Iran determine it on the basis of their indigenous calendars.
Consequently, it would have been a good idea if the fiscal year in Bangladesh was launched from January in line with the calendar year, which could have reduced many complexities in matters of accounting. However, the government decision to start the fiscal year from April in line with the indigenous Bangla calendar is also an excellent choice. Both these two options reflect more accurately the seasonal and agricultural cycles in our economy and society, and the recent decision of the newly elected BNP government is therefore quite commendable.   
There are many justifications for switching to the April-March fiscal year. For example, it would enable the completion of infrastructural works, including those in the communication sector, before the start of the rainy season. That would empower and encourage the contractors to finish their works without disruption. Regrettably, it has become a bad practice in Bangladesh to start digging roads and other structures hastily during monsoon in order to foot bills before the conclusion of fiscal year in June. As a result, suffering of people, especially those who live in cities and towns, often becomes almost unbearable. Apart from that, it opens up a floodgate for resorting to windfall gains through corruption and pilferage at different layers of the government.   
It is pertinent to note that the government of neighbouring India has already made a move to switch to the January-December fiscal year by dispensing with the past colonial tradition. As a stopgap measure, the budget is now being presented in parliament in the first week of February instead of the last week. In fact, the Indian state of Madhya Pradesh had announced the shifting of its fiscal year to the January-December cycle with effect from 2018.
Many justifications have been cited for that move. For example, it is expected to align the domestic economy with the prevailing practices in a majority of developed nations. It is also likely to be a progressive and convenient transition for the local economy as it gets increasingly integrated with the global economy. A uniform fiscal year in line with the dominant global practices would be helpful to numerous business entities, including multinational ones, as they had to previously deal with two types of financial years. Other arguments put forward for adopting the January-December fiscal year include the need for aligning it with the vital monsoon season and crop harvests for both Rabi and Kharif periods. Besides, experts opine that the current time frame leads to suboptimal utilisation of the working season, and crucially, the fiscal cycle was previously chosen without taking the national culture and tradition into cognisance. If the fiscal year is not aligned with the dominant international norm, then it also has some impact on data collection from the perspective of national accounts.
There will obviously be certain costs for changing the fiscal year from July-June to April-March. A change would require major readjustments by business entities and National Board of Revenue (NBR) in the form of one-time costs. Some people may even raise questions on whether it is worth spending this money. But observers feel that the move would prove to be beneficial for the local economy, as it conforms to the local climatic and agricultural cycles and is also more aligned to fiscal periods across the globe.
However, although aligning the fiscal year to global customs will benefit the country’s economy, it will entail some costs for both the government and the business cum financial sector. This is particularly relevant in the backdrop of newly adopted VAT, Customs and Income Tax laws, which have been rolled out in recent years. The transition will certainly be a logical and progressive step, but the timing should be decided by keeping in mind the costs of the transition. There is also a need for developing robust arrangements and mechanisms that can operate and function in the midst of likely complexities. History tells us that many good initiatives and measures have failed to deliver the anticipated benefits and outcomes in the past due to poor time management.

The writer is a retired Additional Secretary and former Editor of Bangladesh Quarterly. He can be reached at [email protected]