Small taxpayers disregarded

The parliament yesterday passed the finance bill for fiscal 2021-22 without addressing calls for reassessing some vital tax issues, including easing the burden on small incomes amidst rising prices of essentials and additional costs to maintain hygiene.

Demand for raising the tax-free income limit remained unmet, while the tax rate for the lower income tiers was unchanged. Incomes of up to Tk 3 lakh is tax-free.

For incomes of up to Tk 4 lakh, a 5 per cent tax is applicable on the difference with the preceding tax-free tier, meaning Tk 1 lakh.

Had this rate been applicable for incomes of up to Tk 6 lakh, low-income people dealing with this severe period of the pandemic could have availed a bit of a relief, said Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue (CPD).

Low-income people should be given priority through tax relief in a pandemic and increasing the tax-free income threshold is a major way to shield them from additional pressure, he said.

The highest ceiling for tax on individual incomes should be 30 per cent, he said.

Apart from this, issues such as removal of advance income tax (AIT) and advance tax (AT) during import remained unaddressed despite appeals from businesses.

However, there was some relief for restaurants and mobile financial service (MFS) providers.

The parliament did not adopt the National Board of Revenue's proposal to increase the corporate tax rate for MFS providers to up to 40 per cent for the next fiscal year, as is applicable for banks and financial institutions.

Instead, the MFS providers will pay 30 per cent tax, as is paid by non-listed companies, in fiscal 2021-22 instead of the 32.5 per cent paid the previous year.

There is relief too for businesses from mandatory use of formal channels such as banks and MFS providers for transactions of more than Tk 50,000 from the next fiscal year as the government backtracked from its previous position.

Businesses will have to use formal financial channels for any payment exceeding Tk 5 lakh for purchase of raw materials.

Besides, the threshold for bank transfers or use of formal channels for payment of salaries and remunerations has been increased to Tk 20,000 from Tk 15,000.

Eating at restaurants is also going to be cheaper following a reduction of the VAT rate for fiscal 2021-22. Customers at non-air conditioned restaurants will be required to pay a 5 per cent VAT, down from a previous 7.5 per cent.

Those who dine at AC restaurants will face a 10 per cent VAT in fiscal 2021-22, which was 15 per cent in the outgoing year.

Rahman of the CPD said the government has already given different tax-related benefits to the vulnerable cottage, micro, small and medium enterprises.

Now the government needs to offer a second stimulus package for these units which are major employment generators in the economy, he added.

Ahsan H Mansur, executive director of Policy Research Institute (PRI), echoed Rahman in advocating for a second stimulus package for the small-scale firms.

Both the economists criticised the scope given for whitening black money for the next fiscal year. They also advocated for reforms in the tax policy and tax administration of the NBR for bringing more dynamism in tax collection and more transparency.

Mostofa Azad Chowdhury Babu, senior vice president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), believes withdrawal of AIT and AT from the finance bill would have been better for businesspeople.

Imposing the AIT and AT will increase the cost of business operations during this pandemic, he said.

Allowing undisclosed money to be invested in the manufacturing sector will definitely increase funds available in the garment sector, said Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

More investment means more employment and more income for the people and finally more revenue generationby the government, he said.

Hassan expects undisclosed money to flow into the productive sector.

Shahidullah Azim, vice-president of the BGMEA, urged continuing to keep the current source tax at 0.50 per cent and corporate tax at 12 per cent for non-green and 10 per cent for green garment factories for the next five years.