The President of Dhaka Chamber of Commerce and Industry (DCCI) Ashraf Ahmed on Saturday said that Bangladesh’s economy is passing through a few challenges like inflation, forex reserve, financial market volatility, balance of payment, and depreciation of Taka, but the country would overcome all the challenges.

Ashraf Ahmed came up with this  remark at a press conference in the capital on Saturday.

He expected that as in the past, Bangladesh could overcome these economic challenges as soon as possible,

Regarding economic challenges, he said that both private and public sectors are trying to face the challenges of the economy.

However, the private sector is required to play a pivotal role this year to bring the economy back to the trend of growth stability, he hoped.

For creating a smart Bangladesh, technology transfer and capacity building of CMSMEs through digital engagement is needed, the DCCI president said.

He focused on import substitute industries, and he suggested expanding access to finance for the CMSMEs and industrial startups through dedicated credit lines, loan guarantees and venture capital initiatives.

He said export diversification, export factoring, inter-bank foreign currency exchange and more incentive for the remittance inflow may increase forex reserves.

He also demanded the government promote the Alternative Trade Board (ATB) for trading infrastructure and participation in the capital market.

DCCI Senior Vice President Malik Talha Ismail Bari, Vice President Md. Junaid Ibna Ali and members of the Board of Directors were present during the event.

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."