Scrap minimum tax of Tk 2,000

Finance Minister Mustafa Kamal on June 01, 2023 placed a budget for Tk761, 785 crore with a budget deficit of Tk261, 785 crore in the budget session of Jatiya Sangsad. The proposed budget set the revenue collection target at Tk5, 00000 crore. The target sounds unrealistic as the National Board of Revenue (NBR) record shows that over the past 11 years it has never been able to reach its revenue collection target.

In the outgoing fiscal year it was not otherwise prompting the government to borrow heavily from the central bank. This borrowing has led the country to an economic chaos. To meet the budget deficit the government will collect Tk1, 55, 495 crore from internal sources. Of the internal sources, Tk1, 32, 395 crore will be taken as loan from the domestic banking system, including Tk86, 580 crore in long-term loan, Tk45, 815 crore in short-term loan. In addition, Tk23, 000 crore is expected to be sourced as non-bank loan, including Tk18, 000 crore from national savings tools and Tk5, 000 crore from other sectors. The rest Tk1, 02, 499 crore will come as foreign loan.

Of the total budget, the huge amount of Tk5, 000 crore which the government planned to collect from both direct and indirect taxes seems a bit ambitious target. Ambitious in the sense that such an enormous amount of taxes have never been collected by any previous government. The previous record tells us that it will be almost impossible. The issue that draws our attention is government dependency on indirect tax rather than direct tax.

Indirect tax is basically given by both the rich and poor equally as the tax is levied on goods and services. The tax is equal for every section of people. But in case of direct tax it is mainly imposed on the income of individuals. The majority of revenue collection literally comes from indirect taxes where the contribution of the poor is much more than the rich. But, we think, in terms of tax imposition the poor people have been burdened a lot more than the rich.

The government is saying that the budget was planned bearing in mind the poor and marginalized people. However, the tax imposition in many ways, we think, discriminatory. The rich don’t have to pay any surcharge on their net wealth worth up to Tk4 crore from the next fiscal year. It was Tk3 crore in the outgoing fiscal year while it was Tk2.5 crore surcharge exempt threshold in the budget of 2018-19.

As for the tax-exempt earning ceiling for the people with limited income it has been raised to Tk3.5 lakh from that of Tk3 lakh. A bit of comfort is given for the poor here. But what is shocking is the imposition of a tax of Tk2, 000 on those whose yearly income is below Tk3.5 lakh a year which is not taxable at all. But those who file their income, expenditure and wealth statement even with this meager non-taxable yearly income they also have to pay a minimum tax of Tk2, 000. Otherwise they will not be able to avail 38 services.

As per the National Board of Revenue (NBR) rules, if anyone wants to enjoy a credit card, borrow over Tk5 lakh from a financial institution and open a postal saving account of over Tk5 lakh and so on, he has to pay Tk2, 000 even if his income is not taxable. This minimum tax imposition came into sharp contradiction with the idea of tax-free income. In fact, there will be nothing like zero tax. Ordinary people are already burdened with indirect income taxes that constitute the major part of the income tax earned by the National Board of Revenue (NBR). We think that this policy of the government will widen the gap between the rich and the poor. We urge the government to scrap this provision of the tax of minimum Tk2, 000 for poor and middle-income groups.