The Asian Development Bank (ADB) and the government of Bangladesh on Monday signed a US$400 million policy-based loan to support the government of Bangladesh in implementing its National Adaptation Plan, 2023-2050.

The loan will also support Nationally Determined Contributions 2021 Update to the Paris Agreement to achieve a climate-resilient inclusive development.

Md. Shahriar Kader Siddiky, secretary of Economic Relations Division (ERD), and Edimon Ginting, country director of the ADB, signed the loan agreement on behalf of Bangladesh and ADB respectively at a ceremony held at the ERD in the capital today, reports BSS.

This assistance is the first subprogram of the indicative $700 million Climate-Resilient Inclusive Development Program. Bangladesh is one of the world's most vulnerable countries to the adverse impacts of climate change, recording an annual average loss of about US$3 billion, said a press release.

"As the region's climate bank, ADB is committed to support Bangladesh's progressive actions to strengthen its climate resilience, transition to a low-carbon economy, mitigate its greenhouse gas emissions, and mainstream gender equality and social inclusion in the government's climate actions," said ADB Country Director Edimon Ginting.

The programme will create an enabling institutional and policy environment to mobilize climate finance, prioritize climate actions in the country's overall development agenda, and help the government implement reforms in climate-critical sectors, including agriculture, disaster management, transport and infrastructure, urban development, and energy.

The programme facilitated the creation of the National Committee for Environment and Climate Change headed by the Prime Minister for holistic implementation of the government's climate priorities across ministries.
 
The programme will intensively support the government in operationalizing the Bangladesh Climate and Development Partnership presented recently at COP 28. 

The programme supports the mainstreaming of climate priorities in government planning and resource allocation, and the mobilization of climate finance through green bonds and sustainable finance policy.

At the sectoral level, the programme promotes climate-smart and climate-resilient agricultural practices, especially those that favor female farmers, adaptation of solar irrigation pumps, introduction of climate-resilient infrastructure design and planning, and regulatory framework for adaptation of electric vehicles and introduction of electric buses in the public transport fleet. 

The ADB also helps promote climate-resilient city action plans and improved drainage system for municipalities to reduce urban flooding.

In October 2021, ADB announced it is raising its ambition to deliver climate financing to its developing member countries to $100 billion from 2019 to 2030. This will expand access to new, climate-focused technologies and mobilize private capital toward climate finance.

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."