Industries, Commerce, and Textiles and Jute Minister Khandakar Abdul Muktadir today said that the government has undertaken comprehensive short and long-term initiatives for the modernization and sustainable development of the country’s leather sector with the aim of transforming it into a major source of national income.

“The government has attached special importance to the leather industry to fully utilize its economic potential. The Ministry of Industries and the Bangladesh Small and Cottage Industries Corporation (BSCIC) would provide all necessary policy and implementation support for the sector’s advancement,” he said.

The Minister made the remarks while presiding over the ninth Taskforce meeting on leather industry development, held at the Ministry of Industries conference room in the city, said a press release.

Highlighting the importance of proper management of raw hides, Muktadir directed the authorities to ensure that no hide goes to waste.

He said the entire process, from slaughtering animals to marketing hides, would be brought under a disciplined and systematic framework.

The minister also informed the meeting that training programmes had already been arranged for religious institutions and orphanages ahead of Eid-ul-Azha to ensure proper skinning, preservation techniques and maintenance of quality standards.

Referring to the modernization of the Central Effluent Treatment Plant (CETP), he said, ensuring international compliance standards is essential to making the leather sector globally competitive and profitable.

Regarding the Savar Tannery Industrial Estate, the minister instructed the authorities concerned to ensure an uninterrupted power supply and strengthen security measures to maintain a stable production environment.

Addressing financial concerns raised by the Bangladesh Tanners Association (BTA), Muktadir requested the Financial Institutions Division (FID) and Bangladesh Bank (BB) to facilitate easy-term bank loans for leather traders and expedite financial assistance to maintain liquidity in the sector.

The meeting was attended, among others, by State Minister for Environment, Forest and Climate Change Shaikh Faridul Islam, Industries Secretary Md. Obaidur Rahman, Commerce Secretary (Routine Duty) Md Abdur Rahim Khan and Bangladesh Export Processing Zones Authority (BEZA) Executive Member Major General (Rtd) Md Nazrul Islam.

Taskforce members expressed their commitment to implementing the recommendations aimed at building a modern, compliant and profitable leather industry.

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."