Ongoing economic woes not reflected in budget: CPD

UNB
Published at : 07 June 2024, 10:41 pm
Ongoing economic woes not reflected in budget: CPD
Photo: Collected

The Center for Policy Dialogue (CPD), in its review of the proposed budget for FY2024-25, said that the necessary steps to address ongoing economic concerns are missing from the budget document.

Dr. Fahmida Khatun, Executive Director of the think-tank, said this while speaking on ‘National Budget 2024-25: CPD’s review’ held at the Bangabandhu International Conference Center, on Friday.

She said that the targets of inflation, GDP growth and investment in the budget are very ambitious and not realistic.

Many targets of economic indicators in the budget will not be met, she asserted. Failing to realize the ongoing economic challenges, the steps taken to address the challenges in the budget are weak and inadequate, she pointed out.

Dr. Fahmida said, “The time of the budget is very challenging. We expected this budget to be very innovative. That there will be creative and some bold moves. Because the traditional budget will not be able to solve any kind of problem in challenging economic times.”

"The new budget seems to us similar to the previous budget. Current problems and traditional crises have arisen in the economy, this budget could not provide adequate steps or directions to solve them," she said.

Speaking about the facility of black money whitening, she said the provision of whitening black money by paying only 15 percent tax and without any scrutiny is discouraging for those who pay taxes regularly.

"We have seen in the last few years that revenue collection does not increase much by giving this facility. Rather, it incentivises those with black money and discourages those who pay taxes regularly," said Dr. Fahmida.

CPD fellow Dr Mustafizur Rahman said, "It's not fair for taxpayers to pay a 30 percent tax on legal income while only being asked to pay 15 percent on illegal earnings. Similarly, companies holding on to hidden money for a long time shouldn't get away with a 15 percent tax rate. There should be stricter laws with penalties for earning illegally, including additional taxes."

"Note that a new provision has been added to not ask any question regarding the income. Suppose, they whiten the money by paying tax but the Anti-Corruption Commission later enquires about it. But that cannot be done under the current budget proposal," he said.

Speaking at the question-answer session in the press briefing, Mustafizur Rahman said the proposed budget has no measures to provide relief to the common people from the onslaught of inflation.

"If you calculate the inflation, the low-income people who did not have to pay tax last time will have to pay tax this time as the tax-free limit has not been increased," he said.


MSH

Provident funds to pay 27.5% tax

Published at : 20 September 2023, 04:57 pm
Provident funds to pay 27.5% tax

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."