Finance Minister Amir Khosru Mahmud Chowdhury on Monday said the government has made adjustments to the expenditure and budget deficit in the supplementary budget to address economic challenges while continuing social safety net programmes.

Moving the Supplementary Budget Bill in Parliament, he said that since assuming office, the government has undertaken effective measures to improve people's living standards and revive the economy.

The minister noted that rebuilding the economy remains one of the government's key priorities amid global uncertainties, structural weaknesses within the economy and inflationary pressures.

"We are trying to reduce wastage in public expenditure, curtail non-priority spending, lower administrative costs and ensure greater efficiency in government spending," he told the House.

At the same time, Khosru said, the government is working to implement commitments made in the BNP election manifesto.

However, due to the global economic situation, he said, adjustments were made to electricity and energy subsidies, while social safety net programmes expanded through initiatives such as Family Card, Farmers' Card and allowances for imams, muezzins and priests.

To accommodate these measures, the government made adjustments to expenditure and the budget deficit in the supplementary budget, the minister added.

Considering the slower pace of government spending, particularly the implementation of the Annual Development Programme (ADP) before the election, the revised budget proposed a reduction of Tk 2,000 crore, bringing total net expenditure down to Tk 7.88 lakh crore.

Khosru said the revised budget proposed a deficit of Tk 2 lakh crore, equivalent to 3.3 percent of the country's Gross Domestic Product (GDP).

According to him, allocations for 27 ministries, divisions and other institutions have been increased by Tk 56,117.59 crore under the supplementary budget, while allocations for the remaining 35 ministries and divisions have been reduced by Tk 59,348.67 crore.

Thanking lawmakers for what he described as a lively discussion on the supplementary budget, the minister urged Parliament to approve the grants sought for expenditures other than charged expenditures outlined in the supplementary financial statement.

He formally requested all members of parliament to endorse the supplementary budget proposals for the current fiscal year.

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."