Income tax is most likely to be mandatory for owners of land, flat or car from the next fiscal year, even if they fall into the tax-free income bracket.
The government is planning to introduce such provisions in the upcoming national budget for FY24, in a bid to widen the tax net, bring potential taxpayers under scrutiny, and boost direct tax revenue collection, finance ministry and National Board of Revenue (NBR) sources said.
If any owner of land, flat or car does not have taxable income, they will still have to pay a nominal income tax of at least Tk 2,000. It should be noted that more than 30 lakh people file income tax returns annually, but a large number among them show income as non-taxable.
The upcoming provision will help the government find potential taxpayers and help boost revenue collection, NBR officials say.
They added that some property owners have no taxable income, and do not file returns in case they have to pay taxes. NBR believes that those who own property are also capable of paying taxes, and this is why a provision targeting them may be introduced in the budget for next FY.
Currently, individual taxpayers have to pay 5 per cent income tax on the next Tk 1 lakh income after enjoying tax free income of the first Tk 3 lakh, while the highest income tax rate is 25 per cent on annual income above Tk 16 lakh.
Besides, Tk 5,000 is set as minimum tax for city dwellers.
Bangladesh is likely to increase tax free income by Tk 50,000 to Tk 3,50,000 for individuals in the next FY. As the government is likely to raise the tax free income ceiling, the provision will increase taxes as they are considered to be potential sources.
The NBR earlier signed Application Programming Interface (API) with Dhaka Power Distribution Company (DPDC), Dhaka Electric Supply Company Ltd (DESCO), and Bangladesh Road Transport Authority (BRTA) to track errant landlords and car owners as part of efforts to widen the tax net.
At the API signing ceremony, NBR Chairman Abu Hena Md Rahmatul Muneem had said, Many house owners often hide their identity if they see taxmen looking for them, and the authorities cannot do anything without first tracking the owner down.
“So we signed API contracts with the DPDC and DESCO to identify owners of the electricity meters, thus the home owners.”
Income tax exemptions 4.1% of GDP
Due to being pressured by the International Monetary Fund (IMF), the NBR for the first time is likely to add tax expenditure data – such as reducing tax provision, exemption and so on – in the budget document.
NBR sources say the rebates and exemptions provided by the income tax wing take up nearly 4.1 per cent of the GDP. If the NBR withdraws tax benefits, the country’s tax-to-GDP ratio will rise by 4.1 per cent.
Income Tax Law likely
The income tax law is likely to be passed in the next budget as per IMF recommendation. If the law goes to the review committee, the government may not be able to pass it during the budget session.
So, the law may be passed as a money bill, because the president of Bangladesh can send back all bills passed by the parliament for review except a money bill.
The NBR published the draft law in October 2021 drawing public opinion, and the board formed a review committee on October 6, 2022 to finalise the law. Later, the cabinet approved the draft of Income Tax Act 2023 in principle after examining the existing law on January 23.
In last year, a 20-member review committee on the Income Tax Act 2022 (draft), comprised of public-and private-sector representatives, recommended the NBR to curtail the return submission load for compliant corporations to 12 in a year to make it more business friendly.
The number of tax return filing at-source could be trimmed down to 12 in a year in FY24 to ensure a business friendly environment, say sources from the Ministry of Finance.
At present, corporations have to submit 29 returns for “at-source tax” in a year, putting the companies under more strain in preparing volumes of paperwork and spending additional money.
Tax return filings any time
Taxpayers can file their returns at any time, even after deadlines, by paying a penalty for the delay and interest on the payable amount, as the revenue authorities aim to reduce harassment of taxpayers, say finance ministry sources.
In such cases, taxpayers will not be required to seek a time extension and the deputy commissioner of taxes will not assess their returns, but they may be charged the penalty by 1 per cent – 2 per cent.