Finance Adviser Dr Salehuddin Ahmed has said that the next national budget for fiscal year 2025-2026 (FY26) would be rationale while pragmatic and local need-based projects would be given priority in the next Annual Development Programme (ADP).

“Pragmatic and local need-based projects will be given priority in the ADP for the next fiscal year while the next budget will be more or less rationale,” he said.

Dr Salehuddin also mentioned that like in the past, no ‘monument’ type project would be undertaken in the fresh ADP involving billions of dollars as such projects failed to bring any good result to the nation.

The Finance Adviser was speaking at a pre-budget meeting for the next fiscal year with the senior journalists of the print and electronic media held at the Multipurpose Hall of the Finance Ministry at Bangladesh Secretariat on Wednesday.

Special Assistant to the Chief Adviser Dr Anisuzzaman Chowdhury, Finance Division Secretary Dr Md Khairuzzaman Mozumder, senior journalists and senior officials of the Ministry of Finance attended the meeting.

Responding to the various suggestions from the media, the Finance Adviser said that the government would try to give utmost protection to the industries as well as put emphasis on improving the law and order situation.

He said that the next budget would not be fully traditional or be out of the usual framework. “We’re framing the budget considering the resource gap, debt service liability and debt management,”
Dr Salehuddin also noted that no matter any successive political government comes, it would not be possible for them to throw away the next budget as it is being framed in such way.

He informed that his budget speech would not be too long as it is likely to be contained within 60 pages.

The Finance Adviser said that the interim government would try to vie for an equity-based and welfare oriented state although it would not be possible to ensure those in all arenas due to the time constraints.

He said that during this short timeframe, the government would try to continue the economic reforms side by side implementing the budget.

Dr Salehuddin, also the former central bank governor, said that they would focus more on the short-term reforms than the mid-term and long-term reforms while it would not leave anything hanging. 

“We don’t have limitless resources, so we’ll put more focus on social safety nets, health and education sectors,” he added.

Turning to the issue of the country’s LDC graduation bid, the Finance Adviser said, “We can’t avoid graduation …we’ll remain sensible,”

He said that some 5 to 6 countries are also looking forward to Bangladesh over the matter while taking necessary preparations would certainly brighten the country’s image further and thus increase the country’s pride in the global arena.

He said that a taskforce, headed by Chief Adviser’s Special Assistant Dr Anisuzzaman Chowdhury, is working in this regard while the country also needs to take necessary preparations, enhance its efficiency and competitiveness for smooth LDC graduation.

Stressing more on building a cashless society and faceless tax system, the Finance Adviser said that the taxpayers in various countries across the world need not to go to the tax officials due to the faceless tax system.

He said no matter the country progresses in RMG and ensures export diversification, it would not prosper further unless it emphasizes on IT and technology, semi conductor industry and AI.

Finance Secretary Dr Md Khairuzzaman Mozumder said although containing inflation is a big challenge, but it is now declining and hopefully by end of this June, it would come at 8 percent.

Citing that the exchange rate and foreign currency reserve is now stable while there is also a jump in the export earnings and inward remittance inflow, he said that after controlling inflation, they would focus more on GDP growth.

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."