Tougher for evaders, burden on marginal taxpayers

People with property abroad will face stricter scrutiny under the Income Tax Bill 2023, which includes a penalty of paying a fine of equal fair market value for undisclosed assets.

According to experts, while the bill does not contain any drastic switch from the existing income tax ordinance, there are some minor changes. For instance, the specification of the taxpayers has been modified.

The bill also changed the definition of company as per the drafted law in Bangla.

Besides, if the bill passes, the number of withholding tax returns required to be submitted by companies annually will be reduced from 29 to 12, which is expected to reduce brainstorming work, harassment and cost of doing businesses.

Finance minister AHM Mustafa Kamal placed the bill in the Jatiya Sangsad and was later sent to the parliamentary standing committee on the finance ministry for further scrutiny. The committee was asked to submit its report within five working days.

Immunity for tax officials

The proposed law provides immunity for tax officials from all accountability in regards to collecting, withholding or paying tax deductions from the income of any person.

Moreover, no lawsuit can be filed in a civil court for rejection or revision of tax assessment or against any other order of the tax officers.

No criminal case or any other proceedings can be taken against any government servant for his acts done “in good faith” as well.

The bill also proposes incentives for tax officers and employees. It provides for an award for outstanding contribution in tax collection or detection of tax evasion.

The Income Tax Bill 2023 grants tax officials the power to enter any building, place, ship, vehicle, aircraft and search income records, money, precious metals, jewellery or other valuable articles or things.

Officials can break down doors, boxes, lockers, safes, cupboards or any other receptacle if it is locked. Income records, money, precious metal jewellery or other valuables can be seized upon search.

Reducing cost of doing businesses

One of the major goals of the Income Tax Bill is facilitating business and investment in Bangladesh.

Under the Income Tax Ordinance 1984, corporations have to submit 29 returns and statements for source tax in a year. The draft law reduced the number of required returns submission to 12.

The bill also proposes a legal basis for electronic tax management, which, according to experts, will result in a business and investment friendly environment.

Keeping in mind the cost of doing business in Bangladesh, the draft tax law covers a comprehensive list of deductible business expenses, and addresses conflicts with International Financial Reporting Standards, said Snehasish Barua, a member of the income tax review committee formed by the National Board of Revenue (NBR).

In particular, he added that this will be applied in cases of the treatment of the gain or loss of foreign currency, impairment losses, the treatment of right of use assets, gains from asset revaluation, investment property, contribution to Workers Profit Participation Fund, etc.

Tax burden on marginal taxpayers

Two-thirds of the gross salary or Tk 4.5 lakh, whichever is lower, will be considered allowable deduction from salary, according to the draft law, which is feared to increase the tax burden on marginal taxpayers.

Barua said, “As per section 167 of the draft new Income Tax Act-2023, an individual who travels outside Bangladesh other than for medical or religious purpose will be required to file an Asset Liability Statement.

“This means even if an individual’s income does not cross the threshold for one page return, they will be required to file the statement. This change will not impact other than those marginal taxpayers,”

Reduction discretionary power of tax officials

There are at least 20 cases of the proposed draft law defined by the mathematical methods. As a result, there is no scope for the discretion of the tax officials in the application of all these provisions.

Also, to prevent opacity and abuse of discretion, the new bill proposed to prepare a guideline for tax officials in selecting and conducting compliance audits.

A number of measures have been taken to reduce arbitrary use of power regarding the transparency of the audit process, experts said.

Tax on MFS’s interest

Under the proposed bill, taxpayers would have to pay tax on the interest amount disbursed by a Mobile Financial Service (MFS) provider.

They will also have to pay tax on the interest amount of a loan taken from any citizen of Bangladesh, except banks.

Besides, associations of persons, firms, funds having turnover of more than Tk 2 crore will have to submit audited financial statements under the draft law.

Investment rebate ceiling rose to Tk1.2 lakh

The bill proposes that the threshold of investment rebate on monthly savings schemes be increased to Tk 1,20,000 from the existing Tk 60,000.

It proposes that taxmen would consider salary determined from microcredit administrations as tax-free on the off chance that it could be a ‘revolving fund’ and spend on any resource for the administrations, not as capital for other businesses.

Scope to close TIN, universal self-assessment mandatory

As per the proposed law, taxpayers will be able to cancel their tax registration numbers if they have no taxable income, leave the country or die by showing proof to the concerned authority.

The submission of tax returns under the universal self-assessment method has been made mandatory for all taxpayers.

Besides, tax-day has to be calculated from the day of his return to up to 90 days for expatriate Bangladeshis.