CPD demands hike in tax-free income limit for individuals

In the budget for the next financial year, considering the coronavirus situation, the Center for Policy Dialogue (CPD) has proposed to increase the tax-free income limit for individuals from Tk 2.5 lakh to Tk 3.5 lakh. Besides, CPD said that priority should be given to four sectors including the health sector in the next budget allocation. The think tank also demanded an end to tax evasion and money laundering.

The proposal was made at a virtual media briefing titled 'Covid-19-Current Context and Budget 2020-21' on Saturday.

Distinguished Fellow at the CPD Professor Mostafizur Rahman, Executive Director Fahmida Khatun and research director Khandaker Golam Moazzem spoke at the press conference. Taufiqul Islam Khan presented the main proposal. Finance Minister AHM Mustafa Kamal will present the budget for the new fiscal year in Parliament next June. Budgeting has already begun. The think tank said in its budget proposal that the most important sector should be health during the coronavirus infection.

But consistently small budgets are allocated to the health sector. People have to take healthcare on their own initiative.

Executive Director of CPD Fahmida Khatun said that in the forthcoming budget, most attention should be paid to healthcare, agriculture, social security and employment— four priority sectors. The Covid-19 has hit the world economy hard. It will take at least 3-5 years to overcome and time cannot be wasted. Considering the coronavirus impact, the plan has to be adopted and implemented by adjusting the revenue and expenditure in the forthcoming budget.

At the same time, the limit of tax-free income should be increased to Tk 3.5 lakh from Tk 2.5 lakh. In addition to increasing the scope of the tax net, tax evasion must be prevented. “About Tk 5 lakh crore is being smuggled out of the country every year,” she said, adding that steps should be taken to stop it.

“We have recommended not raising this limit of personal tax-free income limit for a few years, considering the coronavirus situation and inflation. Besides, the lower 3 levels of tax rate should be reduced. The minimum should be reduced from 10 to 5 percent, from 15 percent to 10 percent, and from 20 percent to 15 percent. Besides, this year's tax can be paid till next March,” she added.

The annual tax-free turnover in the SME industry will have to be increased from Tk 50 lakh to Tk 1 crore. In addition, advance income tax and VAT on import of daily necessities should be reduced, said Fahmida Khatun adding that incentives have been provided for big industries. At the moment their corporate tax can be kept unchanged. As the amount of revenue in GDP is much less, so it is necessary to increase the tax net and prevent tax evasion.

Distinguished Fellow at the CPD Professor Mostafizur Rahman said the country's foreign sector is among the challenges. Exports and remittances are declining. It will also decrease in future. Reserves are still not under pressure due to low imports. However, the pressure will increase in future and we need to focus on getting foreign aid. This will have a positive effect on the balance of payments and help increase reserves.

Besides, in order to improve the flow of remittances, the foreign ministry needs to be proactive. Diplomatic relations with different countries need to be strengthened so that they do not send expatriates back Bangladesh at this moment. The fellow further said in their proposal that the next few years will be very challenging in the global context. The budget needs to increase spending in sectors that create dynamism in the economy and employment. Expenditure in unnecessary sectors should be curtailed, job cuts should be stopped giving them special incentives.