Many got rich, but few pay wealth tax

The number of rich people has increased in Bangladesh but only a few pay wealth taxes, also known as surcharge.

According to the law, if you have wealth worth Tk 3 crore and above, including houses and vehicles, you have to pay the surcharge along with regular income tax. This surcharge is a type of charge levied on the deed value of a person’s assets.

The National Board of Revenue (NBR) data shows the number of taxpayers paying surcharge was 13,892 in the fiscal year 2019-20. They paid Tk592.6 crore that year.

The number of tax identification number (TIN) holders in the country was around 68 lakh, and only 0.20 per cent of them paid surcharge, according to the NBR.

The Bangladesh Bank data shows there are about 99,918 millionaires in the country. Also, the number of rich people whose bank deposits increased from Tk 1 crore to Tk 5 crore crossed 78,000 at the end of June this year.

The central bank data also reveals the number of bank accounts with deposits between Tk 5 crore and Tk 10 crore was 11,013 till June this year.

Besides, 3,599 accounts had between Tk 10 crore and Tk 15 crore, 1,732 between Tk 15 crore and Tk 20 crore, and 1,185 between Tk 20 crore and Tk 25 crore.

NBR sources said rich people under tax zone 10 of the capital have paid the highest surcharge than those in other areas. 1,596 taxpayers under this zone paid the highest surcharge in FY 2019-20. They paid Tk51.36 crore.

Doctors mainly submit their tax returns in that zone. About 25,000 taxpayer doctors are among the taxpayers registered in the tax zone 10. Besides, there are also some company directors under the zone.

The NBR data shows taxpayers under the zone 8 paid the second highest surcharge tax. As many as 731 taxpayers of the zone paid surcharge worth Tk43.55 crore in the fiscal year 2019-20.

Besides, 1865 taxpayers falling under four tax zones of Chattogram paid surcharge in the same fiscal year. They paid Tk 84.83 crore. On the other hand, the lowest number of surcharge payers was in Bogra, only 89.

Talking to The Business Post, former NBR chairman Abdul Mazid said a large number of taxpayers eligible for paying surcharge were not paying it.

“The main reason is they are hiding their assets. Also, they do not hold wealth in their names; they use their relatives’ names,” he said.

He did not blame the NBR alone for this, saying city corporations and banks were responsible as well. “If banks provide the NBR with information on accounts having deposits of Tk 3 crore and above while city corporations also give holding tax details of house owners, the revenue board can collect the full surcharge.”

Former NBR member (tax policy) Md Alamgir Hossain echoed Mazid’s view, saying the integration between banks and the revenue board was needed to find out the actual number of surcharge payers.

“But there is a problem in that. If it happens, the rich may try to convert their liquid money into assets or transfer it abroad. As banks fears that customers will withdraw deposits or close accounts to maintain secrecy, they do not want the integration,” the tax expert said.

There are currently five levels of surcharge. Those having wealth worth between Tk 3 crore and Tk 10 crore have to pay 10 per cent surcharge. The rate is 20 per cent for the Tk 10 crore to Tk 20 crore range, 30 per cent for Tk 20 crore to Tk 50 crore, and 35 per cent for more than Tk 50 crore.

Wealth tax was first introduced in 1963 during the rule of Pakistan, which also continued after independence. In 1988, the government added Section 16A to the income tax ordinance through the Finance Acts to make surcharge permanent.

It was later withdrawn in the 1997-98 fiscal year due to pressures from various quarters, but was re-introduced in the 2011-12 fiscal year. At present, surcharge is collected under this section.