Bangladesh Bank Governor Dr Ahsan H Mansur announced that the merger of five private sector Islamic banks is at the final stage, assuring that no employee would lose their job due to the process.

Speaking to a group of journalists at the Bangladesh Bank Boardroom on Sunday, the Governor said, "This merger has no connection with the elections. It is an ongoing process. We hope the next government will continue to advance this process. However, we will not wait for the elections; the five Islamic banks will be merged within the next few months."

The five banks set to be merged are First Security Islami Bank, Global Islami Bank, Union Bank, Social Islami Bank and EXIM Bank.

Dr Mansur emphasised that employees had no reason to worry. Some branches may be reorganised if necessary. "For banks with a higher concentration of branches in urban areas, initiatives may be taken to relocate some branches to rural areas," he added.

In response to a question regarding the repatriation of laundered assets, the Governor said, "The process of recovering assets is a long-term and step-by-step procedure. It is not possible to recover these funds without a final court verdict. For this, specific information and data must be collected, and proper legal procedures followed."

He went on to say, "We want our claims to be verified through the court. Action to recover funds can only be taken based on court decisions."

Dr Mansur also highlighted the Alternative Dispute Resolution (ADR) method, stating, "The path for asset repatriation through amicable settlement outside court is also open. In such cases, lawyers from both sides will seek solutions through discussion. Bangladesh Bank will prepare accordingly and appoint lawyers based on the path the government determines—be it through court or ADR."

The Governor mentioned that preparations are underway to conduct legal proceedings in domestic courts for the recovery of local assets and in relevant foreign courts for the recovery of overseas assets.

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."