Rescheduling the financial year

Dhaka,  Sun,  20 August 2017
Published : 04 Aug 2017, 21:10:24
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OPINION

Rescheduling the financial year

Many feel that the financial year should be rescheduled for January-December as the period from July to June does not allow the government to account for the impacts of monsoon rains on the socio economic dynamics of the country, writes Saleh Akram
A debate on whether our financial year should be changed to January-December from July-June has been going on for quite some time now. The main reason for the change is its inconsistencies with the climatic conditions of the country. The first and last quarters of the year are interrupted by monsoon and environmental adversities. We inherited the financial year from the British and later Pakistan did not change it as it found it to their advantage. Bangladesh did not change it too after liberation although it was found inconvenient and the issue of rescheduling the fiscal year remained alive but dormant. The Finance Minister recently called for a public debate on the issue. The government probably wants to take into confidence the public opinion on the subject.

The financial year (also referred to as fiscal or budget year) is the period used by governments for accounting and budget purposes. It is also used for the purpose of financial reporting by business and other organisations. Government taxes are also calculated and recovered on the basis of financial year. Tax calculation on an annual basis is especially relevant for direct taxation, such as income tax. Many other annual government fees-such as city corporation fees, licence fees, etc. in our country are also levied on a fiscal-year basis.

History of financial year dates back to a few centuries ago. Until 1582, Europe had used the Julian calendar established by Julius Caesar under which the year had 11 months of 30 or 31 days and one month of usually of 28 days and 29 days in every fourth year, i.e., "leap" year. It had augured well for centuries, but since it did not align exactly with the solar calendar, problems developed over time.

US fiscal year begins on October 1 and ends on September 30 of the next calendar year. This was intended to allow the elected Congressmen who assume office in January longer time to participate in the budget process. In 19 countries including ours and four out of eight SAARC countries, the financial year is calculated from July to June. In 166 countries financial year is dated from January 1 to December 31, from April to March in 36 countries and from October to September in 11 countries. Financial year in Sri Lanka and Maldives is from January-December and in Afghanistan from March 21 to March 20 of the following year. India uses April-March period as its financial year although it has recently decided to change it to January-December. Financial year in this part of the year used to be based on crop seasons. India retained April-March financial year after partition, but Pakistan changed it to July-June. Most countries have chosen their financial years to suit their requirements. 

Many feel that the financial year should be rescheduled for January-December as the period from July to June does not allow the government to account for the impacts of monsoon rains on the socio-economic dynamics of the country. Besides, preparation of development projects, approval by ECNEC and tendering process are usually delayed by monsoon rains and floods. Development works cannot be started right from the beginning of the fiscal year due to inclement weather and natural calamities. 

Banks and financial institutions in our country have their yearend closing on December 31. In the interest of economic development of the country and considering the favourable weather in winter, the period of financial year should be shifted to January-December from July-June.

saleh.akram26@gmail.com



 
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