Service holders in Bangladesh have been deprived of reasonable income since independence. The present AL government realized the phenomenon and increased compensation of public servants on an average to double the amount from July 2015. In the proposed budget 2016-17 no change in individual tax slab was declared. The present individual income tax slab will reduce a significant portion of the increased income of public service holders, if the income tax slabs are not widened.
Currently, free income tax limit is Tk2, 50,000. Income tax is levied at 10 per cent on next Tk3, 00,000, at 15 percent for next Tk4, 00,000. Indeed, under present proposal, 20 percent income tax will be levied on next Tk5, 00,000 and 25 percent for the next Tk30, 00,000 and 30 per cent on next full amount. The proposed rate of income tax will encourage tax evasion. The limited income group, service holders will suffer much. In the upcoming budget the individual income tax slabs need to be reviewed.
Hundreds of businesspersons in rural areas in Bangladesh do not pay income tax at all though they earn taxable income. On the other hand, service holders in urban as well as in rural areas cannot evade tax as their employers show the salaries in exact figure to get full reduction from taxable income in their business.
In private sector the salary of the service holders did not increased like government employees. The real income of service holders in Bangladesh have fallen significantly in last couple of years because of high inflation. The business communities shift the burden of price increase to the buyers by increasing prices of their products and services. In fact, inflation brings more money to businesspersons. But the service holders are helpless.
To provide some relief to service holders the free taxable limit for them should be raised to Tk5,00,00 and income tax may be imposed at the rate of 5.0 per cent on next Tk 5,00,000, 10 percent for next Tk 5,00,000, 15 per cent on next Tk 5,00,000 and 20 percent for the rest Tk 5,00,000 and 25 per cent on the rest amount in 2016-17 financial year. Limited income group, service holders should get the benefit with increased purchasing power. The measure will reduce tax evasion. The government should open income tax offices at Upzilla level and bring medium business communities working in rural Bangladesh under the income tax net. Finally, government needs to review rates of income tax slabs and reduce income tax burden on limited income groups.
Md. Ashraf Hossain
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