Finance Minister Abul Hassan Mahmood Ali on Thursday said that Bangladesh enjoys a warm and broader relationship with the World Bank while the lending agency is ready to continue it and thus lend more support to the country.

“We need support and they (WB) are ready to help us,” he said.

The Finance Minister said this when the World Bank country director to Bangladesh Abdoulaye Seck made a courtesy call on him at the Ministry of Finance at Bangladesh Secretariat today.

Sharing his earlier visit experiences with the country director to the Rohingya camp in Cox’s Bazar along with the then World Bank President, Mahmood Ali said that the crisis is still there.

Answering to a question, Ali said that the World Bank has raised some issues on reforms. “I don’t want to mention those. Let’s work on those,” he added.

World Bank Country Director Abdoulaye Seck said that they have just had a very good meeting with the newly appointed Finance Minister.

“You know that the support to Bangladesh is extremely strong and large. We talked about bringing the support into new heights,” he said, adding that the World Bank along with its sister concerns like the International Finance Corporation (IFC) is ready to continue support to Bangladesh.

Alongside lending financing, Seck said reforms are also critically important. “We discussed about how economic reforms agenda is very urgent to move in several fronts, whether it is on exchange rate policy, fiscal policy, safety net policy to protect the most vulnerable from shocks. It is also about banking sector reforms, and it’s a huge agenda,”

He said the World Bank Group really stands ready to support Bangladesh in carrying out the reforms.

Responding to a question, Seck said that the World Bank has invested over more than $52 billion to Bangladesh since independence while currently the lending agency has over $16 billion of commitments in this country across wider areas or sectors like health, education, energy.

The World Bank Country Director said they are more committed to continue support for attaining inclusive growth by Bangladesh.

Replying to another question, Seck said in order to becoming a prosperous and developed country by 2041, financing alone would not work for Bangladesh, rather reforms would make it happen.

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."