Controversial decisions to increase revenue

Investment is stagnant due to dollar crisis. Export earnings are declining continuously. Food inflation is over 10 percent. Overall inflation rate is hovering around double digits. As a result, there is an outcry among businessmen and the general public. Against this backdrop, the government is proposing a budget of Tk 897,000 crore for the 2024-25 fiscal year.

To implement the budget, the government has set a revenue target of Tk 541,000 crore. To meet this huge target, the Finance Minister Abul Hassan Mahmood Ali has taken a bundle of controversial decisions. He is scheduled to present the proposals to increase revenue in the National Parliament today.

The controversial decisions include: Providing the opportunity to whiten black money in the economy once again, imposing tax on the income of public universities, all MPO institutions at all levels as well as government primary schools.

The government has planned to increase revenue income from the capital market. As part of this, capital gains tax will be imposed. In this case, investors whose annual profit exceeds Tk 50 lakh may be taxed on capital gains.

In addition, provisions are being made to deduct tax at source on the income from share sales by entrepreneurs-directors of listed companies.

Moreover, the tax rate on the profits of private universities is being increased. To increase revenue, the finance minister may propose to cancel the tax exemption facility for privately developed hi-tech parks and economic zones. This information has been received from sources at the Ministry of Finance.

According to the sources, in the 2024-25 fiscal year's budget, the opportunity to whiten undisclosed money or assets by paying 15 percent tax without any question is being asked. Earlier, the National Board of Revenue (NBR) had given the opportunity to legalize undisclosed money or assets by paying 10 percent tax. In this case, a proposal may be made to increase the tax rate by 5 percentage points this time.

Anyone can take advantage of this opportunity by paying a 15 percent tax on cash without any questions. Similarly, the opportunity to whiten money can be taken by paying tax at a specified rate when purchasing land, flats, and apartments.

The opportunity to whiten black money ended two years ago. At that time, there was not much response. After that, an opportunity was given for one year to bring back money smuggled from abroad. But no one availed that opportunity. Almost every government regime provides the opportunity to whiten black money. So far, Tk 47,000 crore has been whitened. Economists and businessmen all consider this opportunity to be controversial.

Regarding providing such an opportunity in the budget, Dr. Iftekharuzzaman of Transparency International Bangladesh (TIB) told The Daily Messenger, “Allowing black money to be whitened without any questions is in conflict with the constitution. At the same time, it aids corruption. A taxpayer will pay 30 percent tax on legitimately earned income, while someone who earns illegally will pay 15 percent tax, which is unacceptable in any way. This will create disparity in society. At the same time, those who earn money illegally are being encouraged. The government should refrain from such thinking.”

Dr Khondaker Golam Moazzem, Research Director at the Centre for Policy Dialogue (CPD), a private research organisation, told The Daily Messenger, “We have never supported and will never support the opportunity to whiten black money. These are the government's incentive schemes. These encourage owners of black money. This concession, in a sense, also undermines the political government's accountability. This opportunity for dishonest people discourages honest taxpayers. Because honest taxpayers pay more tax, while owners of black money pay less tax with special benefits. Instead, the government should stop the process of generating black money.”

Sources say that in the upcoming budget, a proposal may be made to impose a 20 percent tax on the income of all MPO institutions, starting from public universities. At the same time, a 10 percent tax may be imposed on the income of government primary schools.

A proposal may be made to impose tax on capital gains in the capital market. A proposal may be made to increase the tax rate for cooperatives from 15 to 20 percent.

Directors of listed companies will have to pay tax at the regular rate even if they earn 'one taka' from selling shares. Tax will be collected from the income from three types of shares: placement shares, sponsor shares, and director shares.

The NBR says that most of the shares of listed companies are held by directors. There is manipulation with these shares. In many cases, allegations arise that directors destabilize the market with these shares. Again, directors earn huge profits by selling these shares. The NBR is focusing on collecting tax on the sale of these shares by company directors.

Professor Shibli Rubayat-Ul-Islam, Chairman of the Bangladesh Securities and Exchange Commission (BSEC), the capital market regulator, told The Daily Messenger, “If capital gains tax is imposed, it will have a negative impact on the capital market. Therefore, we are trying to ensure that capital gains tax is not imposed in the interest of investors and the market.”

Saiful Islam, President of the DSE Brokers Association (DBA), said, “In the current context, there is a crisis of fundamentally strong companies in the capital market. No new fundamentally strong companies are coming to the market. In this situation, if the tax gap between listed and non-listed companies is reduced, good companies will not be interested in coming to the market. This will create obstacles for investment in the capital market. Where incentives should be given for good companies to get listed, the listed companies' tax rates are being increased, discouraging investment in the capital market.”