The Asian Development Bank (ADB) and the government of Bangladesh on Tuesday signed a loan agreement for $200 million to help Bangladesh enhance energy efficiency through smart metering as well as support its transition to clean energy solutions.

Md. Shahriar Kader Siddiky, secretary, Economic Relations Division, and Edimon Ginting, ADB country director for Bangladesh signed the agreement on behalf of Bangladesh and ADB, respectively.

The Smart Metering Energy Efficiency Improvement Project will support the government’s efforts to reduce losses by installing 650,000 smart prepaid gas meters (SPGMs) for residential customers, primarily in South Dhaka and Narayanganj, said the Manila-based lending agency in a media release.

Installing SPGMs is one of the climate mitigation measures specified in Bangladesh’s nationally determined contributions under the Paris Agreement.

The project is expected to reduce around 400,000 tons of carbon dioxide emissions annually, ADB said.

“This project will help save gas; prevent gas wastage; build customers’ awareness of the safe and efficient use of gas; and improve the financial performance of the gas distribution company by improving revenue streams and reducing billing, collection, and monitoring costs,” said Ginting.

“This project will also contribute to meeting Bangladesh’s climate mitigation targets for the gas distribution subsector as set out in the updated 2021 nationally determined contributions,” he added.

The project increases the operational efficiency of the state-owned Titas Gas Transmission and Distribution Company Limited—the country’s largest gas distribution company—through transformational and modernized approaches.

This includes the promotion of the use of advanced digital technologies, such as smart meters connected with the unified metering data management system and an automated web-based grievance management system.

Combined with the improved safety awareness programme among customers and the promotion of safety standards for gas cooking appliances, the project also aims to reduce gas-related accidents and ensure safe energy access, especially for socially disadvantaged groups, such as women and residential users living in lower-income communities.

Through an accompanying technical assistance of $1.75 million, ADB will support the government in its low-carbon energy transition and methane leakage loss reduction plan for the gas distribution subsector.

This includes preparing pre-feasibility studies on innovative clean energy solutions and assessing the viability of accessing private capital for future project financing, including the use of carbon credits.

The assistance will be financed by a $1 million grant from the Technical Assistance Special Fund and $750,000 from the Republic of Korea e-Asia and Knowledge Partnership Fund, administered by ADB.

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."