Finance Minister Abul Hassan Mahmood Ali on Friday asked customs officials to go hard on dishonest traders and provide tax incentives to the honest to raise revenue collection.

He was speaking as the chief guest at a seminar to mark the International Customs Day-2024 at the NBR Building in Agargaon in the capital.

Calling the NBR as the main driving force of the country's economic progress, the finance minister said that the country's economic progress is recognised by the world now.

“Although Bangladesh has made progress in all economic indicators, still our tax GDP ratio is not satisfactory. I hope the National Board of Revenue (NBR) will try to increase the tax GDP ratio,” he added.

Ali said, “One of the main functions of customs is trade facilitation. Our trade volume is increasing, customs have to be truly smart, modern and go for automation to build Smart Bangladesh.”

He mentioned that preventing money laundering is one of the responsibilities of customs and said that it is very important to increase the capacity of customs.

He hoped customs officials would pay special attention to this aspect.

With NBR Chairman Abu Hena Rahmatul Muneem in the chair, Finance Secretary Md Khairuzzaman Mozumder, and Agriculture Secretary Wahida Akter were present at the event as the special guests.

NBR members Zakia Sultana, Md Masud Sadik, Hossain Ahmed, and Chairman of Incepta Pharmaceuticals Ltd Abdul Muktadir, among others, spoke at the event.

On the growth of the country’s trade volume NBR member Sadik said that the number of bills of entry every day stood at 17000, which was around 3500 in 2010.

He said customs automation and modernisation are in progress, but traders will actually be benefited while other certification authorities like BSTI, sports authorities, trade bodies, banks, and related ministries ensure automated certifications.

Zakia Sultana said Bangladesh Customs has an official working relationship with 56 countries and lion's share of revenue is earned from this sector.

She said customs has to work on security, money laundering, and environmental issues, where different sector experts have to work together.

She said dealing with 17000 consignments every day is really a difficult matter without automation of all the authorities.

In the event, the World Customs Organization (WCO) 'Certificate of Merit' was awarded to 17 officers of NBR and its affiliated offices and three institutions.

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."