Measures needed to increase revenue

To meet conditions of IMF

Mahfuja Mukul: Lower-middle-class people disoriented by rising inflation. In such a context, there is no effective action to control commodity prices in the upcoming 2024-25 fiscal year budget. On the other hand, measures taken to increase revenue to meet International Monetary Fund (IMF) conditions will further increase household consumption. About half a dozen products are being increased in VAT rates and supplementary duties at the manufacturing, supply stage. From street beggars to wealthy people, the burden of VAT will also have to be borne. This list includes mobile phones, cigarettes, snacks, fruit juices, soft drinks, carbonated beverages, energy drinks, energy saving bulbs etc. Besides, one percent duty may be imposed on hundreds of zero duty products. This may increase the price of daily necessities and consumer goods at the consumer level.
Currently, 37 lakh individual taxpayers file income tax returns. A large portion of these are middle class taxpayers. There is no income tax exemption in the budget for this category of taxpayers. Despite the rise in inflation, the tax-free income limit is not being increased in the budget considering income tax collection. However, the provision of income tax return assessment is being abolished to reduce tax payer harassment. That is why major changes are being made in the income tax law in the budget. As a result of this decision, both individual and corporate tax payers will get some relief.
NBR feels that if the tax-free income limit is increased, a large number of people will be excluded from income tax. Inflation has increased, along with the proportional increase in people’s income. Therefore, the organization does not consider it justified to increase the limit. A review of past history shows that the NBR has never reduced the tax-free income limit in a row. Generally, the income limit is increased at an interval of 2-3 years. In the latest budget of the current financial year, the tax-free income limit has been increased from Tk 3 lakh to Tk 3.5 lakh. In 2020-21, the tax-free income limit has been increased from Tk 2.5 lakh to Tk 3 lakh and in 2015-16 fiscal year from Tk 2.20 thousand to Tk 2.5 lakh.
However, there are steps to collect additional tax from the rich in the budget. Currently, the top tax rate for individual taxpayers is 25 percent. Income tax at the rate of 25 percent is payable if the annual income is more than Tk 16 lakh. It is being increased to 30 percent. If the annual income is more than Tk 46 lakh, 30 percent income tax has to be paid.
On the other hand, major changes are being made in the indirect tax (import duty, supplementary duty and value added tax or VAT) sector to increase revenue.
The effect of reduction and increase in indirect taxes falls on every class of people in the society. From street beggars to the wealthy, all people have to pay indirect taxes. Narrowing of tax holidays and VAT exemptions for local industries in the upcoming budget; Additional duty hikes on cigarettes and mobile phone calls and internet may be announced. Currently, mobile phone calls are subject to 15 percent VAT as well as 15 percent supplementary duty. On the other hand, there is 15 percent supplementary duty along with 5 percent VAT on internet usage. Along with this, consumers have to pay one percent surcharge. A supplementary duty of 5 percent may be imposed in the upcoming budget. As a result, the price of mobile services at the consumer level may increase.
For example, a consumer can currently talk about Tk 83 if he recharges his mobile phone for Tk 100. The mobile operators deduct the remaining Tk 27 as VAT and supplementary duty. Later it is deposited in the government treasury. If the supplementary duty of mobile services is increased by 5 percent, the consumers can talk about Tk 78. Similarly, internet costs will increase.
Many people visit amusement parks and theme parks to spend time with their families. A hand has also been given to increase the revenue income. Currently, 7.5 percent VAT is levied on entry and rides in amusement parks and theme parks. It is being increased to 15 percent. This will increase the cost of visiting the park. Apart from this, like every year, the supplementary duty on cigarettes is being increased. This will increase the pocket cost of smokers. Unhealthy soft drinks, carbonated beverages, energy drinks, fruit juices may increase in price. Because VAT is being increased on these products at the supply stage. Currently there is 5 percent VAT. It can be increased to 10 percent.
An NBR official told on condition of anonymity that the new VAT law had a standard VAT rate (15 per cent). Due to various reasons, it was not possible to keep it, so VAT is currently being collected at multiple rates. This rate will be rationalized in the next budget. In this regard, NBR plans to increase the VAT rate of non-essential products. Standard VAT rates will be imposed on all goods and services in a phased manner by 2026.
On the other hand, on the advice of IMF, changes are being made in the import duty sector to reduce tax expenditure. One percent duty may be levied on hundreds of zero-rated products. The list includes rice, wheat, corn, mustard seeds, refined soybean and palm oil, sunflower seeds, cotton seeds, various vegetable seeds, crude oil, fertilizers, natural gas, bitumen, coal, gypsum, vitamins, insulin, various essential medicines including diabetes. and raw materials for vaccines and drugs, various useful chemicals, etc. At present, 335 items are exempted from import duties.
NBR believes that the imposition of one percent duty will not increase the price of those products in the market. A senior NBR official told on condition of anonymity that there is duty exemption or zero duty to keep daily commodities within the purchasing power of the common man. Apart from this, keeping the supply of goods in the market normal, expanding the industry, sustaining the market for export goods and considering public importance, the duty rate is kept zero on many products. There is no alternative to imposing tariffs on zero-tariff products to raise revenue and meet IMF loan conditions.