President of the Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) Mahbubul Alam on Tuesday disclosed that the prevailing political situation is severely disrupting not only the country's supply chain but, by extension, manufacturing and production, as well as prices, exports, and even the service sector.

He said this in a views-exchange meeting with business leaders of various sectors, economists, and former leaders of FBCCI on the prevailing trade and economic situation, held at the Gulshan office of the federation.

The FBCCI President presided over the meeting and discussed various issues, including ongoing political violence, the dollar crisis, price inflation, control of imports of luxury goods, bank loans, foreign exchange reserves, ensuring a business-friendly environment, LCs, and others.

Business leaders said that for the past few years, a very stable political and economic environment has prevailed in the country, which is very important for business, trade, and the economy.

But recently, due to the violent activities of political parties, the country's business, trade, and investment are at risk. At the same time, attempts are being made to deliberately disrupt the readymade garment sector, they opined.

Stating that the country's political instability is pushing the national economy to the brink, the FBCCI president said the prevailing situation is severely disrupting the country's supply chain - impacting product production, market prices exports, and service sectors as well.

He insisted that political parties avoid all kinds of violent activities for the sake of the national economy.

Besides, the FBCCI President urged the Bangladesh Bank to play a more effective role in solving the dollar crisis and controlling inflation. He also urged the concerned authorities to ensure uninterrupted fuel supply to continue the production system in industrial factories.

In the ready-made garment sector, the wage commission has been set up according to the demands of the workers and employees, and the wages have been re-fixed based on discussions with both the workers and employers, which is a very positive step, the business leaders said.

MSH

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."