Discordant and discriminatory tax provisions

The Income Tax Act 2023 (ITA 2023) that has replaced the Income Tax Ordinance 1984 since July 01 last exposes many of its weaknesses and discrepancies, particularly meting out unfair and unequal treatment to the low-income savers. Many of its provisions are contradictory with no avenue left for redress. There is an impression that when the new tax law was formulated, not enough attention could be given to details and impacts of some of the provisions on taxpayers because the overriding concern then was to collect as much revenue as could be possible. Or else how can one rationally explain the tax at 27.5 per cent on private provident fund, which is equal to the whooping corporate tax. Similarly, source tax irrespective of the income level is being realised in a step-brotherly manner. Because there is a provision for submission of tax return document, even the non-taxable depositors are required to pay 15 per cent tax on their profits.

These are not only discrepant but also discriminatory. Discrepant, because a person is exempted from any income tax if the amount does not cross the non-income tax ceiling of Tk350,000. But if one such account holder of a bank fails to submit any proof of tax return, tax on the depositor's profit would be deducted at the rate of 15 per cent. What is even more deplorable is that there is no provision for returning the tax thus cut in contradiction to the lowest tax return limit. If a person does not have enough income to be a tax returnee, how can that person submit a proof of tax return? Similarly, it is outrageous to demand tax at the corporate rate of 27.5 per cent from a private provident-fund holder. In many cases of low-salaried employees of the private sector, provident fund is the entire life's savings. As citizen of the same country, they cannot be so taxed when the government employees are exempted from any such tax at all.

The good thing is that the contradictory provisions have vexed even the taxmen and they have pointed out the problem they face to implement the new income tax law. In order to remove some of the provisions' outrageous contradictions and discriminations, the authorities had to call upon the Statutory Regulatory Order (SRO). Already the order has been applied to amend four of the provisions. Mercifully, the issues of source tax on deposits, saving certificates, exporters' cash incentives and turnover taxes on beverages have been addressed. Will the tax on provident fund be rationalised, particularly when it concerns low-income employees of the private sector? The land- and flat-registration tax raised irrationally to 100 per cent is reportedly going to be attended soon. More are likely to be in the pipeline.

Why the authorities have ended up causing such an imbroglio of the new tax regime is their haste to push up the government's revenue income. They have opted for the easy way out instead of working hard to expand the tax net and bring a huge number people of taxable income under the net. This pattern of revenue collection has its backlashes in the form of distorted tax return by many, including the corporate houses, who consider themselves unduly overtaxed. Even it is partly responsible for money laundering. When transparency in financial matters becomes a casualty, aberrations in business and other dealings are a natural consequence.