The Asian Development Bank (ADB) and the government of Bangladesh on Wednesday signed a loan agreement for $120 million to improve access to basic services and climate resilience of remote and rural communities in the Chittagong Hill Tracts (CHT) of Bangladesh.

Sharifa Khan, Secretary, Economic Relations Division, and Edimon Ginting, ADB Country Director for Bangladesh signed the agreement on behalf of Bangladesh and ADB, respectively.

“The Climate-Resilient Livelihood Improvement and Watershed Management in Chittagong Hill Tracts Sector Project will adopt an inclusive, holistic, and participatory approach to support sustainable and resilient community development in CHT region,” said Country Director Edimon Ginting.

“By 2031, the project is expected to increase cropping intensity by at least 50% on at least 7,500 ha of agricultural land; reduce by 50% the average time taken for women from 57,000 households to fetch potable water; and reduce the average travel time along the project-supported roads by 50% for buses, cars, and trucks compared with the baseline year of 2023”. 

The project will cover the three hill districts of Bandarban, Khagrachari and Rangamati. It will help improve village access roads, develop water supply sources and sanitation services, install rooftop solar systems, and establish agricultural facilities, according to ADB.

The project will also improve about 140 kilometers of rural roads with all-weather standards incorporating nature-based, climate-resilient, and safety features, it said.

ADB’s intervention will strengthen watershed management in nine sub-watersheds, to improve resilience to climate change and mitigate risks from natural hazards.

This will entail improving vegetation in watershed areas through agroforestry, building small-scale water harvesting infrastructure, promoting income-generating activities from watershed protection, and training village forest committees in watershed management skills.

In addition, the project will support sustainable land use and climate-smart agricultural practices for food security.

Farmers will be provided training and support to shift climate-resilient crop varieties and to diversify into high-value vegetables, fruits, spices, and medicinal plants.

They will be given training, equipment, and linkages with experts and the private sector to help them process, market, and sell their products.

The expected increase in the demand for skilled labor will be met by offering vocational and professional training courses such as carpentry, food processing, entrepreneurship, and community-based tourism and hospitality management.

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."