Budget proposes 30 pctax on legal income

But black money to be whiten by 15pc tax

Mahfuz Emran: The government has announced the budget for the fiscal year 2024-25 yesterday with the opportunity to whiten the undisclosed or illegally earned black money. The government will have to pay only 15 percent tax to make black money white in the next financial year. However, the tax payable on declared or legitimate income is double that. In the new budget, it is proposed to increase the maximum rate of individual class from 25 to 30 percent. That is, the impact on legitimate income increased.
The country has been experiencing high inflation for more than two years. The headline inflation rate has been over 9 percent for 24 consecutive months. Common people are crushed by the pressure of rising commodity prices. In this situation, there was an expectation to increase the tax-free income limit of individuals. Although there is no such announcement in the budget. The existing tax-free income limit of Tk 3.5 lakh is being maintained. In the current financial year 2023-24, there were six stages of income tax payment for individuals. Seven phases are proposed in the next financial year.

If you want to buy a flat in the elite areas of the capital, including Gulshan-Banani, the price per square foot is Tk 20-25 thousand. Based on the location and aesthetics of the building, the price is higher than this. In that case, the price of a two thousand square feet flat is Tk 4 to Tk 6 crore. However, the price of these elite flats is shown in the registration less than crores of taka. Again, according to the existing salary structure of the country, no government official should be able to afford to buy flats in these areas. However, the reality is different. Government officials are now the main buyers of plots or flats in elite areas.
It is proposed to add the provision of black money whitening again. The proposed budget for the next financial year states, ‘Notwithstanding the existing laws of the country, any authority shall ask any question if a tax payer pays fixed tax rate for immovable properties like flats, apartments and land and 15 per cent tax on other assets including cash.
The former chairman of National Board of Revenue (NBR) Mohammad Abdul Majeedthinks that if the government gives this opportunity, legitimate taxpayers will be discouraged. He told, “Taxpayers will be angry with this.” Because, they will give 30 percent and non-disclosed income earners will give 15 percent. It is unfair. This will discourage taxpayers. Because paying taxes brings them under audit, thousands of questions are asked. But there will be no question in the case of those who are not shown! It can’t be wise.’

As the violence of black money increases in the society, the size of the informal economy is also increasing rapidly. Due to this, the pressure to withdraw cash from the country’s banks is increasing. Bangladesh Bank is constantly increasing the amount of issued notes to cope with the pressure. Last April, the balance of notes issued by the central bank was Tk 3 lakh 5 thousand 198 crores. Out of this, more than Tk 2 lakh 70 thousand crore went out of the bank. Although contractionary monetary policy was announced at the beginning of the fiscal year to control high inflation. The main objective of the announced monetary policy was to control the flow of money in the market. But due to excess of black money earned through bribery, irregularities and corruption, the demand for cash is increasing day by day.
Economist Dr. Ahsan H Mansoor believes that when corruption increases in a country, the need for cash also increases. Black money violence is increasing in all areas of Bangladesh, including bribery and corruption. Due to this, the demand for cash is not decreasing here. Government employees, politicians, businessmen and other influential people are hoarding cash at home. They are doing billions of transactions with cash only. The proposal to whiten black money in the budget will further encourage bribery and corruption.
The budget proposals presented amid adverse economic conditions including high inflation, dollar crisis, continuous depletion of reserves, exchange rate volatility.
Finance Minister Abul Hassan Mahmud Ali presented his first budget in the National Parliament yesterday. The size of the proposed budget is going to be Tk 7 lakh 97 thousand crores, which is 14.20 percent of the GDP. The revenue collection target is set at Tk 5 lakh 41 thousand crores. Out of this, Tk 4 lakh 80 thousand crores of revenue will be earned through NBR. For this reason, several changes are being made in the VAT and tax system based on the conditions of the International Monetary Fund (IMF), according to Finance Department and NBR sources.
More emphasis is placed on collection of direct taxes than indirect taxes. Along with the removal of tax exemption from several sectors, the scope of tax exemption is going to be narrowed. In the next financial year, the target is to increase the revenue by Tk 15 thousand crore by reducing the scope of tax exemption. A decision to impose ‘Capital Gains’ tax on the additional profit of Tk 40 lakh made by investing in the capital market may come at a possible rate of 15 percent. Apart from increasing the spread of tax, the scope of VAT is also going to be expanded in the new financial year.
In the upcoming budget, the amount of tax exemption on ready-made garments, micro loans, remittances, poultry and fishery sectors may be reduced. It is planned to increase the VAT rate from 5 percent to 15 percent on the production of some processed food products. In addition, there is a possibility of an announcement to increase the supplementary duty of 5 percent for talking on mobile phones or using the Internet.
The target of non-NBR revenue is Tk 61,000 crore in the budget. The GDP growth target for the next financial year is set at 6.75 percent. The target is to bring down the rate of inflation to 6.5 percent. But above all, the issue of giving opportunities to those who have earned money illegally by paying less tax than the legitimate taxpayers are now under discussion.
In this year’s budget, the total deficit has been estimated at Tk 2 lakh 56 thousand crores, which is 4.6 percent of the GDP. The government has to rely heavily on foreign loans to cover the deficit. But currently the government is not able to raise loans from foreign sources as expected. That is why bank sector dependence is being increased to meet the budget deficit.
In the budget of the current financial year 2023-24, a target of borrowing from foreign sources was set at Tk 1 lakh 2 thousand 490 crores. But in the revised budget that target has been brought down to Tk 76,293 crores. On the contrary, the target of borrowing from the country’s banking sector has increased. In the revised budget, the target of borrowing from the banking sector has been increased to Tk 1 lakh 55 thousand 935 crore. And in the financial year 2024-25, the target of borrowing from the banking sector is Tk 1 lakh 37 thousand 500 crore.
The announced budget size for the current financial year 2023-24 was Tk 7 lakh 61 thousand 785 crores. But due to failure of revenue as expected and non-availability of foreign loans, the budget has been reduced to Tk 47,367 crore. The size of the revised budget has been estimated at Tk 7 lakh 14 thousand 418 crores. However, there are doubts about the implementation of this revised budget.
There are doubts about revenue collection as per the target in the current financial year. In the first 10 months (July-April) of the current financial year, NBR has managed to collect a revenue of Tk 2 lakh 89 thousand 377 crores. In the revised budget, NBR has been given a revenue target of Tk 4 lakh 10 thousand crores. In order to achieve this goal, the organization has to collect a revenue of Tk 120,623 crore only in May and June. Economists consider this to be very unrealistic in the prevailing economic reality.
The budget also provides for a surcharge of a percentage of the income tax payable on the basis of the net worth of wealthy individual taxpayers. At present, the rate of surcharge payable up to the net asset value of Tk 4 crore is nil. 10 percent if the net asset value exceeds Tk 4 crore and 35 percent if the net asset value exceeds the maximum limit of Tk 50 crore. The existing structure of surcharge also remains unchanged.
Various cc or kilowatt-based environmental surcharges were imposed on several vehicles in the fiscal year 2023-24 as an initiative to reduce the country’s environmental pollution, a concept of levying taxes on sectors harmful to public health prevalent in the developed world. This time also the existing structure of environment surcharge is maintained.
A number of sector-wise tax rates are applicable for company taxpayers. Among the companies defined in the Income Tax Act, which are not publicly traded, the tax rate is conditionally increased from 27.5 percent to 25 percent. In this case, all types of income and receipts and all types of expenses and investments exceeding Tk 5 lakh in each single transaction and Tk 36 lakh annually must be completed through bank transfer.
The tax rate for one-person companies is being reduced from 22.5 percent to 20 percent, subject to compliance with the same conditions as non-listed companies in the budget. The tax rate for listed companies is being conditionally increased from 22.5 percent to 20 percent if shares beyond a certain amount of paid-up capital are transferred through IPO. As an effort to increase the tax-GDP ratio, the existing structure of other tax rates is being maintained by increasing the tax rate for cooperative societies from 15 percent to 20 percent on an overall basis.
According to the NBR, financial inclusion, formalization of the economy, expansion of the tax net and increase in tax compliance are among the most important drivers in developing the formal economy in the country while reducing the impact of the informal economy. The tax policy pursued by the present government is one of continuous rationalization of tax rates along with expansion of tax base. In compliance with this policy, there are many proposals to create new areas of revenue and bring equal competition in business.