10pc tax likely for investing in new factories
The amnesty to legalise undisclosed income without any question and on payment of 10 per cent tax is likely to continue in the upcoming fiscal year for individuals who will make a new investment to set up factories, officials said.
Nearly 50 proposed measures related to income tax and value-added tax may see changes when the Finance Bill 2021 is passed in parliament on June 29.
The government offered the holders of undisclosed income to whiten their wealth without facing any question on the source from any authorities, including the Anti-Corruption Commission, at the beginning of the current fiscal year of 2020-21.
The special opportunity was granted in three categories, including undeclared cash, bank deposits, savings certificates, shares, and bonds. A person could legalise the money by paying 10 per cent tax on the amount they showed in the tax return.
The scope may be retained in the upcoming fiscal year. But the beneficiaries might have to pay a higher rate of 25 per cent.
As a new measure, the benefit of whitening the black money by paying only 10 per cent tax is likely to be limited to the establishment of new factories. The investment will have to be made in the next fiscal year, said officials of the finance ministry.
The government may include a new provision for the black money-holders, allowing them to legalise the wealth by investing in the health and agriculture sectors. The move is aimed at increasing tax collection and encouraging investment to create jobs.
In the outgoing fiscal year, people have been allowed to invest in the capital market by paying tax at 10 per cent on the value of the investment for at least a year.
The government may continue the facility, but the tax rate may be fixed at 25 per cent.
In FY21, people have been permitted to declare any undisclosed properties, including homes, land, buildings, or flats, by paying 10 per cent tax. The special treatment is expected to continue and the tax rate may remain unchanged.
Because of the blanket money whitening opportunity, a record Tk 14,460 crore of undisclosed assets were legalised in the first 11 months of FY21, according to the National Board of revenue.
Among other amendments, the government may cut the rate of VAT for air-conditioned (AC) hotels and restaurants from 15 per cent to 10 per cent and from 7.5 per cent to 5 per cent for non-AC hotels and restaurants.
On June 12, restaurant owners demanded the government reduce the VAT, taking into account the devastating impact of the pandemic on the sector.
Hotels and restaurants employed 22.8 lakh people as of 2019-20, according to the Hotel and Restaurant Survey 2020 of the Bangladesh Bureau of Statistics.
The government may raise the ceiling for businesses on the mandatory use of formal channels such as banks and mobile financial services to carry out monetary transactions.
The proposed budget has made it compulsory to transfer funds of more than Tk 50,000 through formal channels. The new limit might be Tk 5 lakh.