Home ›› 17 Jun 2023 ›› Editorial
Budget for financial year 2023-2024 has been placed in parliament. As proposed, minimum tax Tk. 2,000/- has been imposed on taxpayers who file return but have no taxable income. In budget speech he said, “I propose to make the minimum tax Tk. 2,000/- for competent people having below taxable income but have the obligation to submit income tax returns to take service from the government with a view to circulating this participation in government welfare work.” National Board of Revenue Chairman explained the rationale behind the proposal of imposing minimum tax Tk 2,000/- for every TIN holder having below taxable income. “TIN is not mandatory for the poor. It is a matter of pride for the people who are obliged to take a TIN to be partners of the development of the country paying Tk 2,000/- to the national exchequer. It would not be a burden.
According to NBR officials, under prescription of IMF the government is taking the decision to increase tax collection to boost the tax-GDP ratio which is below 8 per cent.
As reported, a senior official of ministry of finance told on condition of anonymity that this minimum tax will not affect people. Currently, price of a cup of tea is Tk. 6-7. He commented that people can stop drinking a cup of tea every day for the sake of the country. He also said that considering the services that tax officials provide minimum tax of Tk 2,000/-is not much.
In fact, it is to some extent difficult to ascertain the accurate number of Taxpayer’s Identification Number. According to a report of a local English newspaper, at present the number of TIN holders of individual category is about 86 lakh. Out of this only 32 lakhs filed return. Among this 32 lakh around 8 lakh have no taxable income. If the minimum tax is imposed on these 8 lakhs, additional revenue of Tk 160 crore can be earned. Moreover, if minimum tax is applied to all 62 lakh TIN holders (86 lakh - 24 lakh), it will result in an additional revenue earning of Rs 1,240 crore (as reported).
It is said that minimum tax has been introduced to ensure minimum contribution of taxpayers to the tax system. In The US minimum tax is known as Alternative Minimum Tax .It is imposed to ensure that high-income individuals, corporations and estates pay a minimum amount of tax irrespective of other benefits including exemptions. In Canada it is called Minimum Tax on Large Corporations. It is applicable to private corporations controlled by Canadians which have taxable capital in Canada above a certain limit. In France it was called Minimum Tax on High Income till 2017. It was payable by individuals higher amount of net wealth. In 2018 Wealth Tax on Real Estate has been introduced. There is no minimum tax in India. Indian taxation system is based on progressive rates, similar to that of Bangladesh.
Record shows that minimum tax was imposed in imposed in Bangladesh in the 90’s of last century. The amount was as below:
A company has to pay 0.6 per cent tax on its turnover even it incurs loss.
Minimum tax of three types on the basis of residence of the taxpayer was introduced in assessment year 2013-14 which still continues with increase in amount. So far the point of minimum tax was applicable to taxpayers having taxable income (income above tax-free limit). But minimum tax for return filers having no income or below tax-free limit has been proposed (certainly it will be passed in parliament) for next assessment year i.e. 2023-24. As mentioned in finance bill 2023, amount of minimum tax will be Tk. 2,000/- irrespective of residence and amount of income below taxable limit for persons who are liable to file return under section 75. It is directly related to persons intending to avail 38 types (6 more has been added to the list for next year) of services under section 184A of Income Tax Ordinance, 1984.
Apparently this idea is good but it has other sides also. Ahsan H Mansoor, Executive Director of Bangladesh Policy Research Institute and former IMF official, opposed to imposition of minimum tax Tk. 2,000/- saying that it will harm low-income people. It is against the worldwide accepted basic principle of taxation - no taxable income, no tax. Former chairman of NBR Muhammad Abdul Majid said that administrative complications will increase if this decision is implemented (The |Business Standard dt. 21-5-2023).
Experts think that stopping drinking a cup of tea daily is a funny idea. A person showing zero income or below taxable income in return certainly belongs to marginal level. We don’t live in such a society that people will save or deposit Tk. 6/-7/- daily for paying tax Tk. 2,000/- yearly. It is the duty of tax officials (or any employee of the government) to provide service to people. They are paid for it. There is no scope to relate it with minimum tax.
According to Finance Act, 2022 proof of submission of income tax return is mandatory for availing 38 services from government and other authorities. Probably from that point of view this arithmetical calculation of earning Tk 160 crore has been worked out but it is an illusionary idea. Except regular return filers and unless compelled nobody among those 8 lakhs will come to file return. Normally people pay tax for their own necessity, not to be a partner of development. Unless compelled no TIN holder (or anybody) will
file return.
Other than issuing a notice income tax offices are not capable enough to bring them under tax-net. Even there is no surety that those notices will be served properly. Because of change of address and residence, incomplete mailing address, staying away from the address, unwillingness to receive notice etc. most of the notices will come back unserved. In majority cases it will result in wastage of time, labour, paper and postage. However, it is expected that proper mechanism will be developed to implement this decision of collecting minimum tax.
The writer is a former Commissioner of Taxes. He can be contacted at [email protected]
