Well-off likely to pay higher taxes

Affluent people may have to pay higher taxes in the upcoming fiscal year under amended wealth-tax provisions in the new budget, among some other changes in fiscal measures.

The base of calculating surcharge would be actual payable taxes instead of existing tax at source or annual business turnover of individual taxpayers.

With the changes, the tax from well-off quarters would see a quantum leap, officials say.

The outgoing FY2023-24 budget has offered a benefit for wealthy people through raising their tax-free limit for wealth surcharge.

In 2023-24, the previous AL-led government facilitated the well-off section of society by raising the minimum ceiling to Tk 40 million from Tk 30 million. It was kept unchanged in the current year's budget.

Currently, the surcharge payable up to the net asset value of Tk 40 million is zero-rated.

In addition, black-money-holders may have to pay three-to five-time higher taxes than the existing rates in the upcoming fiscal year to whiten their money investing in real estate.

Officials have said the facility might be continued with the higher penalty following pleas of the realtors to salvage the sector from existing struggles amid economic downturn.

Currently, the tax rate for the purchase of apartment by investing black money is fixed on per-square-metre basis.

Official sources say the method of collecting taxes would be same with higher tax rates, ranging from three to five percent on the basis of locations.

Also, a fresh tax at source on 150 import goods, excepting essential goods, may be imposed from July 1, 2025.

The imports may include raw materials of apparel industries, electronics, and computers.

The finance adviser may announce these fiscal measures, including retention of the black-money-whitening facility, in the budget for the upcoming fiscal year on June 2, 2025.

Already, the vetting of the 2025-26 budget has been completed by the law ministry.

However, NBR officials have said the scope of whitening undisclosed money would be restricted to some areas, including buildings, houses, flats, floor space and land.

Currently, in the real-estate sector, black-money-holders must pay the highest per-square-metre taxes in Dhaka's upscale neighbourhoods.

Currently, individuals need to pay Tk 6,000 per square metre for any property-such as a structure, house, flat, or apartment-and Tk 15,000 per square metre for land in all mouzas under the jurisdictions of Gulshan, Banani, Motijheel, Tejgaon, Dhanmondi, Wari, Tejgaon Industrial Area, Shahbagh, Ramna, Paltan, Kafrul, New Market, and Kalabagan thanas. In the upcoming budget, these rates may increase up to fivefold.

The Finance Bill 2024 provides that minimum surcharge rate would be 10 per cent if net wealth of an individual exceeds Tk 40 million and 35 per cent for net wealth exceeding Tk 1.0 billion.

Currently, a 10-percent surcharge is levied on assets worth between Tk 30 million and Tk 100 million or in case of having more than one car or owning over 8,000- square-foot real estate.

The surcharge rate is 20 per cent for those whose assets are worth between Tk 100 million and Tk 200 million.

On the other hand, 30-percent surcharge is for those with assets between Tk 200 million and Tk 500 million.

Taxpayers with assets exceeding Tk 500 million have to pay a 35-percent surcharge.

Towfiqul Islam Khan, Senior Research Fellow at the Centre for Policy Dialogue (CPD), hails the move meant to reduce income inequality, establish equity as new avenue for tax collection has been reduced significantly.

However, he suggests taking cautious step on collection of surcharge so that existing compliant taxpayers do not feel penalized.

"Many of the well-off remained out of tax net and there was a survey to find out how many people have flats and overseas asset, it should be disclosed publicly," he adds.

Chartered accountant Snehasish Barua says taxing imports is often seen as "low-hanging fruit" in Bangladesh, primarily due to the challenges of expanding the tax net and increasing overall tax collection. If the government plans to impose advance income tax on the currently exempted 189 items, this might not significantly affect industrial undertakings.

"This is because tax paid at the import stage on raw materials is not considered minimum tax, rather it is treated as advance income tax, which is adjustable against the final tax liability. However, for commercial importers, this will be considered a minimum tax. Commercial importers generally treat this as part of their cost, which will undoubtedly increase the cost of those goods, thereby fuelling inflation."

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