The parliament yesterday adopted the finance bill for the 2021-2022 fiscal year without addressing certain vital tax issues, in particular that of small incomes, in this severe phase of the pandemic, which could jeopardize the good motivations of budget allocations .
One of the major problems was the personal income tax. There is none until Tk 3 lakh. For income up to Tk 4 lakh, a 5 percent tax is applicable on the increase, which means Tk 1 lakh. If this rate had been applicable for incomes of up to Tk 6 lakh, low-income people facing this severe period of the pandemic might have enjoyed some relief, a prominent economist said.
Low-income people should be given priority through pandemic tax breaks and raising the tax-exempt income threshold is a major way to protect them from additional pressure, said Mustafizur Rahman, distinguished member of the Center for Policy Dialogue (CPD).
The tax slabs continue, with 10 percent taxing a subsequent Tk 3 lakh increase in individual income, 15 percent for an additional Tk 4 lakh and 20 percent for an additional Tk 5 lakh.
On the other hand, the highest personal income tax cap is expected to be 30%, he told the Daily Star by phone when asked to comment on the adoption of the draft. finance law.
Rahman argued over the finance bill providing the ability to launder black money by paying taxes.
He said that instead of providing the scope, the government should instead take enforcement action to collect more taxes.
The government can also widen the tax net to generate more revenue, he said, adding that the possibility of laundering black money creates an imbalance in society and threatens good governance.
In fact, honest taxpayers become demoralized if the government encourages black money laundering, he added.
The previous experience of allowing black money laundering in different sectors was not very good, as these investments were mainly made in the real estate sector.
One of the main reasons for the boom in property prices in Bangladesh is that black money is allowed to be invested in this sector, Rahman said.
The government has already granted various tax advantages to vulnerable cottages, micro, small and medium enterprises, he said.
Now the government must offer a second stimulus package for these units which are the main job generators in the economy, he added.
Rahman also said the government should have revised the proposed budget much earlier in parliament this year given this Covid-19 period to take pragmatic budget action.
Usually, the government revises the budget allocation seven to eight months after the proposed budget comes into effect, starting July 1 of the year.
Ahsan H Mansur, executive director of the Policy Research Institute (PRI), thinks the existing tax exemption limit for individual income was fine.
He echoed Rahman, however, in arguing for a second stimulus package for small businesses.
Mansur also said the possibility of laundering black money would help boost investment and, therefore, jobs during this pandemic.
He said that such investments in Bangladesh do not happen in a year because the process is very long.
The government should therefore also consider giving just one year to launder black money.
Mansur also said that property prices would not rise too much due to the extent of black money laundering in the sector, as people would not feel encouraged to invest by paying 25% tax. and a 5% penalty.
Rahman and Mansur have both advocated for reforms in the tax policy and tax administration of the National Board of Revenue (NBR) to bring more dynamism in tax collection and more transparency.
Mostofa Azad Chowdhury Babu, Senior Vice President of the Bangladesh Federation of Chambers of Commerce and Industry (FBCCI), believes that the withdrawal of withholding income tax (AIT) and withholding tax (AT) of the finance bill would have been better for businessmen.
The imposition of AIT and TA will increase the cost of doing business during this pandemic, he said.
Allowing undisclosed money to be invested in the manufacturing sector will certainly increase the funds available in the garment sector, said Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA). .
More investment means more jobs and more income for the people and finally more income generated by the government, he said.
Hassan expects undisclosed funds to flow into the productive sector.
Shahidullah Azim, vice president of BGMEA, urged to keep the current withholding tax at 0.50% and corporate tax at 12% for non-green garment factories and 10% for factories of ecological clothing for the next five years.
The parliament, however, did not adopt a proposal from the National Revenue Council to increase the corporate tax rate for mobile financial service providers (MFS) to 40% for the next fiscal year, as is the case for banks and financial institutions.
Instead, MFS providers will pay 30 percent tax, as is the case with unlisted companies, in fiscal year 2021-2022 instead of the 32.5 percent paid the previous year. .
Businesses are also getting relief from the mandatory use of formal channels such as banks and MFS providers for transactions over Tk 50,000 from the next fiscal year as the government reversed its previous position.
Companies will need to use formal financial channels for any payment exceeding Tk 5 lakh for the purchase of raw materials.
In addition, the threshold for bank transfers or the use of formal channels for the payment of wages and salaries has been increased to Tk 20,000 from Tk 15,000.
Eating out will also be cheaper following a reduction in the VAT rate for the 2021-22 fiscal year. Customers of non-air conditioned restaurants will have to pay 5% VAT compared to 7.5% previously.
Those who dine in AC restaurants will be subject to 10% VAT in the 2021-2022 fiscal year, up from 15% the previous year.