No opportunity to bring back smuggled money

Mahfuz Emran: There is no provision in the FY 2023-24 budget to bring the smuggled money back to the country without question. Surcharge may be increased on the wealth. Besides, the surcharge collection process will be simplified. And this time again there will be protection for the domestic industry to spread the ‘Made in Bangladesh tag line’ globally. Private agents will be appointed in rural areas to increase tax net.
This information is known from the sources of National Board of Revenue (NBR). There is now a surcharge of 10 percent to a maximum of 35 percent on the income tax of wealth taxpayers. If the individual taxpayer’s asset limit is between Tk 10 to Tk 20 crore, he has to pay 20 percent surcharge. And 30 percent on assets between Tk 20 to Tk 50 crore and 35 percent on assets above Tk 50 crore.
Besides, if you have assets between Tk 3 to 10 crore, if you have multiple cars in your name or if you have a residential property with an area of more than 8 thousand square feet in the city corporation area, you have to pay a minimum of 10 percent surcharge.
Revenue Board sources said that to fulfill the conditions of the International Monetary Fund (IMF), Bangladesh will have to earn Tk 234,000 crore as revenue in the next three fiscal years. In the fiscal year 2023-24, revenue collection should be increased by Tk 65 thousand crores. The budget may propose to increase the existing surcharge by 5 to 10 percentage points. As a result, the rich may have to pay higher taxes. An official of the Board of Revenue told on condition of anonymity that the surcharge may be proposed to be increased at a reasonable rate. In the current harsh economic reality, when revenue collection has become difficult, cooperation from the wealthy is also required. Besides, the proposed surcharge structure can be further simplified.
When asked, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Vice President Fazle Shamim Ehsan said that the rich will pay more taxes because they enjoy more privileges. But all kinds of citizens have to accept the irony of getting some civic benefits. Government should take initiatives to reduce such sufferings starting from driving license to getting some civic benefits. I am willing to pay more taxes, or spend more money on civic benefits. But want the benefits of citizens without suffering.
What is surcharge?
A surcharge is a type of ‘extra’ tax. In the case of individual tax payers, if someone has more assets than a certain limit, they have to pay this ‘increase’ surcharge along with the regular tax. It is levied based on net worth. It is also called ‘wealth’ tax. For example, let’s say a taxpayer has a net worth of Tk 3 and a half crore. Apart from this, the annual income from the job is Tk 5 lakh. Here the income coming from the job has to be taxed. Apart from this, a separate surcharge has to be paid for assets.
According to the Board of Revenue, around 15,000 individual taxpayers paid the Tk 600 crores. Although the concerned say that the number of accounts with deposits of more than one crore rupees in the country’s banks is over one lakh. The number of people paying surcharge there is absurd.
The revenue collection target may increase by Tk 60 thousand crore.
Sources in the Ministry of Finance said that the total revenue target for the new financial year may be Tk 5 lakh crore, which is 15 percent higher than the target of the current fiscal year and equal to 10 percent of the country’s total GDP.
The National Board of Revenue has been tasked with collecting Tk 430,000 crore, which is 16.2 percent more than the current fiscal year. The current fiscal year revenue collection target is Tk 3 lakh 70 thousand. That is, the revenue collection target will increase by Tk 60 thousand crores in the new financial year. In addition to the NBR target, the non-NBR revenue collection target has been set at Tk 20,000 crore and the Non-Tariff Revenue (NTR) target has been set at Tk 50,000 crore.
No opportunity to return smuggled money
Despite much criticism, the government in the last budget included the provision of ‘offshore tax amnesty’ for the first time in the Finance Act through a mere 7 per cent tax to repatriate laundered money without question. Although this initiative of the government did not see the light of day. In the first 10 months of the fiscal year (July-April) no money came from abroad in this process. On the other hand, the Finance Act-2022 also provides for an equivalent amount of penalty if undisclosed assets are not shown in the income tax return.
It is known that in the next budget, there will be no opportunity to return the money smuggled abroad in the amnesty. Also, the opportunity to show undisclosed offshore assets or immovable assets abroad is being abolished. The government came under fire from economists and civil society for taking this initiative in the last budget. However, in the last post-budget press conference, Finance Minister AHM Mustafa Kamal expressed hope that the money would be returned on this occasion.
Research institute Center for Policy Dialogue (CPD) said at the budget review event that the facility provided in the budget to bring back the money laundered will not be of any use. Income tax or any other authority cannot raise questions if money laundered by tax is legalized as per the facility given in the budget. However, as a result of this initiative, no money will be returned from abroad. Honest traders will lose enthusiasm.
If asked, the former chief economist of the World Bank Zahid Hossain told that honest taxpayers are discouraged by such discriminatory policies. It has been said from all quarters that the money will not be returned. However, on this occasion, it is necessary to check whether money laundering from the country has increased or not. The difference between dollar price in the informal market and bank dollar price in the last few months can be seen to some extent.
CPD Honorary Fellow Professor Mostafizur Rahman said that the money will not be returned from CPD. It is proven. Those who have laundered money abroad have assets in the country as well. Many countries can recover money from traffickers through tax recovery mechanisms. We can do that too. Besides, it is necessary to strengthen the related institutions to prevent money laundering.
An official of the Board of Revenue said that they are embarrassed that no money has been returned in 10 months. It is also foolish to expect those who have laundered money abroad to bring it back. Besides, if someone brings the smuggled money to the country as remittance, then the government will give an incentive of two and a half percent. It will also legalize the money, so why would smugglers legalize the money by paying 7 percent tax.
Tax net spreading
Only 18 to 20 million people pay income tax in the country. The country’s tax GDP ratio is below 8 percent, the lowest in South Asia. Most of the taxpayers in the country are urban-centred. The government took a loan from the International Monetary Fund (IMF) to overcome the economic crisis. Conditionally major reforms in the revenue sector should be done, tax GDP should be increased. The IMF has to collect an additional tax of 10.5 percent of the gross domestic product (GDP) in the next financial year.
It is known that in the next fiscal year, it is being considered to appoint private tax collection agents up to the union level to collect taxes from rural areas.
According to revenue board sources, it has been proposed to appoint tax agents in different districts like developed countries to bring the people of villages under tax net. New tax agents will also help new tax payers. Those who have not yet filed their tax returns despite having e-TIN, will also assist them in preparing their returns. NBR officials discussed this proposal in a meeting with Finance Minister AHM Mustafa Kamal recently.
A provision called ‘Income Tax Preparer (ITP)’ will be included in the Budget Finance Bill subject to the approval of the Prime Minister. A draft of which has also been prepared.
The former chairman of NBR, Mohammad Abdul Majid said, ‘Why is the tax GDP ratio decreasing, where is the leakage – it is necessary to study it. It needs to be discussed by the National Parliament. Our GDP is growing, but not realized. Tax agents should be appointed on a trial basis. This initiative will make taxpayers aware.
According to revenue board sources, the government can reduce the corporate tax rate by 2.5 percent for both listed and non-listed companies involved in manufacturing by emphasizing the tag line ‘Made in Bangladesh’. In case of listed institutions, this rate may come down to 17.5 percent. For non-listed companies, the corporate tax rate can drop to 25 percent.
Besides, it is known that the corporate tax rate will remain unchanged in the case of banks and mobile operators. Those concerned said that as a result of this initiative, companies will be encouraged to get listed in the capital market. Currently the corporate tax rate is 20 percent for listed companies, 27.5 percent for non-listed companies and 22.5 percent for one person companies.
An NBR official, who did not wish to be named, told that the budget will be formulated with priority given to domestic industry. Earlier TV, fridge were luxury goods, now they are not. Now they are everyday products. The duty rate on AC imports may be increased more than before. No one will be motivated to buy domestic AC if they get imported AC at comparable price.
The official said advance income tax (AIT) may be increased on some products, pointing to the increase in prices of imported cars, refrigerators and ACs. Or all kinds of supplementary duties and rates may be raised.
NBR chairman Abu HenaRahmatulMunimsaid in the pre-budget discussion meeting that has repeatedly talked about providing various facilities to protect the domestic industry and strengthen the Made in Bangladesh brand.
The budget for the fiscal year 2023-24 will be around 7.5 lakh crore, which will be the highest budget size in the history of Bangladesh. Finance Minister AHM Mustafa Kamal is expected to present the National Budget in Parliament on June 1.