By: Sajjadur Rahman
Owing to what the finance minister called a gradual decline in international trade-based revenues, the government is making all-out efforts to boost revenue from domestic sources, thereby forcing people to carry a heavy tax burden.
Income tax and Value Added Tax (VAT) seem to have caught the government’s eyes.
Even though the finance minister retained the threshold of tax-free income for individuals at Tk 1.8 lakh, despite double digit inflation throughout the year, he has proposed increasing the minimum tax payable by an individual to Tk 3,000 from the existing Tk 2,000.
If a taxpayer does not have a tax identification number (TIN), the deduction of tax on bank interest will be 15 percent instead of 10 percent. Taxpayers receiving loans or gifts exceeding Tk 5 lakh, not done through banking channels, will have such gifts treated as income.
The minister also spoke of reducing tax dodging by automating relevant government offices and equipping them with technology. A plan to introduce a “Risk-based Revenue Audit Manual” to prevent taxpayers from abusing the self-assessment scheme will also help accelerate the tax collection process.
In the budget proposed yesterday, tax on all kinds of exports, deducted at source, has almost been doubled to 1.2 percent from the present 0.6 and 0.7 percent. The finance minister said it was also essential to collect taxes from exports in the interest of the country.
Payments for purchases, other than those for raw materials, over Tk 50,000 will have to be made through the banking channel. Otherwise the transaction will not be considered an expense.
To increase revenue from domestic sources, the budget proposed deducting tax at source at 2 percent on mobile phone bills and on the amount recharged on prepaid phone accounts. This means if a prepaid mobile phone user recharges his or her phone with Tk 100, he or she will get Tk 98 worth of talk time.
Similarly, tax will be deducted at source by 1 percent on the total amount received by International Gateway (IGW) Services and 5 percent on the amount the gateway pays to other operators. This means overseas calls will be costlier.
The prices of land will also increase, as 5 to 3 percent tax (based on location) at source have been imposed during sale of property by land developers.
The government has also increased tax on privately owned cars, sport utility vehicles and microbuses, to be collected during the renewal of their registration and fitness certificates.
A uniform trade VAT rate of 4 percent at all levels of wholesale and retail sales was proposed to abolish the existing system in which VAT between 2 and 4 percent is charged. Local wholesalers and retailers who used to pay 2 percent VAT will now have to pay more.
Smoking will be costlier as supplementary duty on cigarettes has been increased to 39, 56, 59 and 61 percent from 36, 55, 58 and 60 percent.
To boost income from VAT, alternate dispute resolution system or ADR has been introduced for a quick disposal of disputes. In addition, a new VAT law, to be placed in parliament, will be fully implemented by 2015, the finance minister said.
More duty will also come from new car imports as the price of a new car will never be lower than that of a reconditioned car, he said.
The finance minister has also proposed adding one more slab of 150 percent in the existing eight slabs of supplementary duty structure.
The government, however, proposed supporting local industries by reducing tax benefits.
Yearly turnover tax has been exempted or reduced depending on the size of a small and medium enterprise. Annual turnover of up to Tk 7 lakh has been fully exempted while 2 percent tax has been levied for turnovers between Tk 7 lakh and 24 lakh and 3 percent tax for turnovers between Tk 24 lakh and Tk 60 lakh.
Source: The Daily Star