The second round of tariff policy discussions between Bangladesh and the United States was ‘encouraging’, said Commerce Adviser Sk Bashir Uddin on Monday.

“We returned from the US yesterday (Sunday) after concluding the second round of talks. Today, we briefed our stakeholders on various aspects of the discussions,” he told reporters following a meeting at the Ministry of Commerce.

Sk Bashir shared insights into the draft Reciprocal Tariff Agreement currently under negotiation between the two countries and confirmed that preparations are already underway for the third round of discussions.

“We are preparing to visit the United States again this month. We’re hopeful of a positive outcome,” he said.

Referring to the latest round of talks held in Washington, the adviser said, “The discussions were quite engaging and overall encouraging. I also had a meeting with the US Secretary of Commerce. We interacted with 35 to 40 people directly involved in the negotiations from their side." 

"A number of useful suggestions came out of those engagements. We’re optimistic that through this dialogue, the US will agree to a rational tariff rate for our exports," he continued.

He said Bangladesh has maintained a strong presence in the US market for nearly a decade.

“We have been doing business in the US since 2015, paying tariffs. Our enterprises rely on their own capabilities. As long as there’s no discriminatory treatment, our businesses will continue to perform successfully,” Sk Bashir said.

When asked what Bangladesh considers a ‘rational tariff rate’, he responded simply, ‘zero’.

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."