The Bangladesh Bank (BB) said that the supply of US dollars in banks is more than their requirement, so reducing the exchange rate is logical.

Bangladesh Bank spokesperson and Executive Director Mazbaul Haque said this at a press conference at the BB headquarters in Motijheel on Thursday.

He said that last year short-term foreign debt liability was $16 billion, now it is reduced to $6.9 billion.

Besides, there is a surplus of $1.0 billion in the current account. Now the LCs are opened with immediate dollar payment. In addition, the supply of dollars in banks is now more than the demand. As a result, the decision of the Bangladesh Foreign Exchange Dealers' Association (BAFEDA) is correct, the BB spokesperson said.

He said that the US dollar price is determined depending on demand and supply. Dollars are used to purchase services and goods and to clear service debts and foreign liabilities. Now the import price is being monitored.

As a result, the demand for dollars has reduced, he said.

On Wednesday, for the first time in more than a year, banks decided to lower the exchange rate of US dollar. The decision to reduce the price of the dollar by Tk0.50 has come into effect from Thursday.

Besides, the price of the dollar has decreased by Tk 0.50 paisa for sale to importers. 

The BAFEDA and the Association of Bankers Bangladesh (ABB) decided to reduce the dollar price in a meeting held in the evening on Wednesday. According to the decision, the price of the dollar to buy expatriate and export earnings will be Tk110, which was earlier Tk110.50.

To meet the import liability, the dollar price can be taken as Tk110.50, which was Tk111 earlier.

However, in addition to the government's 2.5 percent incentive on expatriate income, banks can also give the same amount of incentive. As a result, the beneficiaries will receive a maximum of Tk115.50 per dollar for inward expatriate income.

Despite such a statement from the BB, the banks still bought expatriate income at the rate of Tk121 and more per dollar.

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."