Amid the ongoing dollar crisis, Bangladesh’s experienced a 41-month low in inward remittances in September, receiving $1.34 billion. The last time remittances were this low was in April 2020, when they were at $1.09 billion, according to data from the Bangladesh Bank (BB). 

The expatriates sent close to $1.6 billion in remittances in August, itself the lowest in six months, since February when it was $1.56 billion. Yet the flow decreased even further to $1.34 billion in September, the lowest in the last 41 months.

That dates back to when Bangladesh received $1.09 billion in remittances in April 2020. After that, the flow of inward remittance increased sharply even during the COVID-19 pandemic time.

Bangladeshi expatriates sent $2.19 billion in remittances in June this year and in July it was $1.97 billion. 

The sector insiders said that when the exchange rates available in the Kerb or the open market become higher than in the banking channel, transactions in Hundi increase. And when demand for hundi increases, remittances decrease.

Last month, the dollar exchange rate was Tk6 to 7 higher in the open market than in the banking channel. Therefore, expatriates have reduced sending remittances through legitimate channels in the hope of more profit, they said.

In the last fiscal (2022-23,) Bangladesh received total remittances of $21.61 billion. In the previous fiscal year 2021-22, the expatriate sent a remittance of $21.03 billion. Bangladesh received the highest remittances ever in the fiscal year 2020-21. The amount of which was $24.77 billion.

Companies and organisations will be required to file tax returns on the income generated by employee welfare funds from the current fiscal year and pay a 27.5 percent tax on the earnings. 

The Income Tax Act 2023 incorporates the provision, lifting the tax exemption and amnesty on the compulsion to file returns for funds such as provident funds, gratuity funds and workers' profit participation funds maintained by the private sector.

The law, however, has exempted government-managed provident funds from taxation, raising questions.

TIM Nurul Kabir, executive director of the Foreign Investors' Chamber of Commerce & Industry, said there were many other avenues to collect tax.

"Employees benefit from provident funds after their retirement. So, the authority should not slap taxes on retirement benefit."

He said while levying the tax, the government has not treated provident funds of the private and public sectors equally.

"It is discriminatory," he said, adding that they would appeal to the tax authority for the withdrawal of the tax on income from provident funds.

Debabrata Roy Chowdhury, director for legal, regulatory and corporate affairs at Nestlé Bangladesh PLC, said the introduction of income tax on trust funds would lower the overall income from such schemes.

"This will have an adverse long-term impact on retired employees of private organisations."

Chowdhury urged the authority to address the issue in line with the spirit of the government's initiatives aimed at ensuring social security for private sector employees.

"The recent introduction of the universal pension scheme for private sector employees is a good example of that."

A senior official of the NBR, on condition of anonymity, said the income of government-managed provident funds was exempted in line with the Provident Fund Act 1925.

He said provident funds under the private sector had been historically exempted and there was no requirement to submit tax returns. As a result, it was unclear whether the funds were properly utilised.

"From now onwards, we will see proper disclosure."

The tax official said the contribution of payroll tax is about 3 percent of the total income tax although it should increase as the economy is growing.

Md Shahadat Hossain, a former president of the Institute of Chartered Accountants of Bangladesh, said income from investment in savings certificates, where people invest as a source of future earnings, is already taxed.

"From that perspective, the imposition of tax on provident and other employee welfare funds seems okay."

However, Towfiqul Islam Khan, senior research fellow at the Centre for Policy Dialogue, said social protection for private sector employees was low.

"Provident and other workers' welfare-related funds provide little social protection. The imposition of tax will increase inequality. But there can't be any discrimination in taxation between private and government provident funds."

Khan, citing the latest income tax law that replaced the Income Tax Ordinance 1984, said the NBR tried to find new avenues to increase tax collection and improve the nation's revenue-gross domestic product ratio, which is one of the lowest in the world.

"We can see the desperation of the tax authority to boost collection. This ultimately reveals the inability of the NBR to catch the tax evaders and illicit money makers."