Budget

SECOND PART

FISCAL MEASURES

Mr. Speaker,

In the first part, I have informed this august Parliament of the objectives of our socio-economic development and of the various strategic policies for poverty alleviation, investment, human resource and infrastructure development, public and private sector partnership, and overseas development assistance, implementation of development programmes and comprehensive financial management of the alliance government. Now, in the second part, I would like to focus on the steps taken, procedure followed and efforts made to mobilize internal resources,

Mr. Speaker,

02. 1 have to inform this august Parliament with regret that the contribution of tax revenue to our national economy is inadequate. Even in comparison wit our neighbouring and other developing countries, we are much behind in this regard. It is not desirable for us to be known as an entity averse to paying taxes. We have to increase the collection of internal resources for ensuring an unhindered allocation of resources required for the overall economic development of the country. In the current fiscal year 2003-2004, we set a target of 29,071 crore taka to be collected from the sources of the National Board of Revenue and
others, the target for the NBR being 27,750 crore taka. It is expected that by the end of this fiscal yew the total tax revenue will stand at 28,300 crore taka, out of which the contribution of the NBR will be 27,050 crore taka. Compared to last years collection there will be about 17% growth in total revenue and for NBR alone that will be 16.62 %.

Mr. Speaker,

03. In order to ensure that the prices of certain essential commodities remain stable in the domestic market mid-term measure& in the fonia of reduction or withdrawal of import duty~ adjustment in the VAT and supplementary duty were taken in the backdrop of price hike of those items in the international market. These have made a negative impact on the achievement of revenue target. In principle, I do not like the reduction of tax rates as a mid-term measure at all. This kind of measures should be avoided unless there are compelling necessities. Mid-term changes in the duty and tax rates adversely affect revenue resulting in a reduced tax collection. As a result, allocation of resources earmarked for various development programmes cannot be ensured which impedes implementation process and slows down the expected rate of economic growth.

Mr. Speaker,

04. Frequent hartals, strikes and siege programmes are self-destructive for the country and the nation. The effects of such activities are devastating on revenue earning, and, for that matter, on overall economic activities of the country. By now,
the frequency of hartals has reached such a level that there w 5 (five) nation-wide and 7 (seven) regional hartals only in I last months of April and May. It is unfortunate for the natior we fail to realize the gravity of the harms caused by such se destructive hartals and siege programmes. If such situati prevails, it will be difficult to implement the developm programmes undertaken for poverty alleviation and to achie the objectives of the Millennium Development Goal, The nati has to find a way out.

Mr. Speaker,

05. Ours is a democratically elected govemme accountable to the people. Our prime objective is the oven welfare of the country and its people by ensuring goc governance, social justice and development along with evolvir a modem, tolerant and simple tax system in commensurate wii global and regional trade liberalization. Import revenue wi decline in the process of trade liberalization owing to gradw removal of trade barriers and reduction of customs dut' keeping pace with the forces of free market economy. So, xx have to put more emphasis on income tax and VAT, We have I make our revenue administration and management efficien more effective and modem by ensuring good govemanec transpar6ncy and accountability. With that end in view, reforr programmes have been undertaken to reorganize the NBR an to simplify tax laws and regulations as well as to ensure thei enforcement and compliance. These reform programmes ar mainly aimed at introducing a modem outlook in ta administration and management, and reducing the discretionar' powers of tax officials, expanding tax base, simplifying ta payment procedure, removing inefficiency, preventin~
corruption, and ensuring more transparency and accountability in tax administration.

Mr. Speaker,

06. The reform-oriented activities, pursuant to relentless
practice of democracy, our government have consolidated reciprocal trust and solidarity within public and private sector partnership. Consistent with democratic norms and principles, in the process of budget formPlation we have exchanged views in several rounds of meetings and discussions with various professional groups and business bodies, as well as with economists and Hon'ble Members of Parliament. Their valuable suggestions significantly contributed to overall budget formulation process. This consultation process will be more intense in future. I have tried to accommodate in the budget the recommendations of the Revenue Reforms Commission, as well as the valuable suggestions and guidance from these discussions.

Mr. Speaker,

07. Now I would like to place before this august Parliament the important proposals relating to direct and indirect taxes.

Direct Tax

Income Tax

Mr. Speaker,

08. Of the direct and indirect taxes, Income Tax is
major source for mobilising internal resources. As an outcom of globalization, collection of import duties is graduali declining. Hence, increasing importance is being put on Incom Tax. On the one hand, Income Tax raises internal resource an ensures social justice, and on the other, ensures equitabl distribution of wealth in society.

09. It is therefore very important to develop a moden efficient and accountable tax administration and a environment congenial and simple for the taxpayers to compl~ To achieve this goal, reforms measures have been undertaken widen the scope of self-assessment, reduce discretionar powers of tax officials and improve the tax paying culture. I principle, I am not in favour of imposing new taxes. And, believe it is possible to increase collection of revenue throug effective management and service-oriented administration. Th will further expand the tax base by encouraging spontaneot compliance.

Mr. Speaker,

10. With a view to expanding the tax base, making the tax rate equitable, simplifying tax payment procedures and also to make the tax administration and management service-oriented, I am now presenting my proposals Mr. Speaker, before this august Parliament through you;

(a) Revenue Reforms Commission as well as with the members of varidus professional and commercial organisations have suggested that in view of inflation and increase in the cost of living, tax burden of the individual class of assessees should be reduced by raising the ceiling of the tax-exempt income and also by further enhancing the ceiling attracting the highest rate of income tax. Taking these into consideration, the level of tax-exempt income will be raised from Tk. 90,000/- to Tk. 1,00,000/- and for the highest rate, the level will also be raised to Tk. 9,00,000k from Tk. 6,40,000/-. The schddule of income and rates of tax may be seen at (Annexe-'A').

(b) To provide the taxpayers with the opportunity to draw up their financial plan in advance and to assess their tax liability at the beginning of a year, I want to introduce the practice of declaring the schedule of tax-rate also for the following income-year. Accordingly, the schedule of income tax rates of individuals, local authorities and companies prescribed for the assessment year 2004-2005 will also be applicable for the assessment year 2005-
2006.

6
(c) To encourage foreign direct and joint investmen the existing tax rate of 15% on income from capital gain arising out of transfer of stocks and shares of privat limited companies be reduced to 10%.

(d) At present, the tax rates applicable for textile and jute industries are 20% and 37.5%, respectively, which creates discrimination between the two sectors. In order to remove this anomaly and also to provide some relief to them, the rates of income tax for both sectors be re-fixed at 15%.

(e) To make submission of income tax returns compulsory for all individuals, firms, companies or institutions holding Tax Identification Number (TIN).

(f) To make it compulsory for all individual assessees to submit expenditure statement reflecting their style of living.

(g) To make it compulsory, for all clubs in metropolitan and urban cities having restaurant and rest house facilities to submit tax return for assessment of tax on their net income and also to make it compulsory for a person to furnish TIN while applying for membership of any such club.

(h) The rate of deduction of tax at source from the transfer of immovable properties was reduced from 10% to 5% during the year 2002-2003. The government expected that this reduction in registration cost as well as income tax would contribute to the increased collection of both registration fees and income tax. But, in fact, it has not been the case. On the contrary, tax collection from this sector has fallen. For the sake of collection of tax that is due, the rate of advance deduction of income tax for registration of transfer deeds of immovable properties be raised to the previous level of 10%.

(i) At present, the rate of deduction of advance income tax on the profit from the approved securities and bonds varies from 25% to 45%. For the sake of equity, the rate of deduction of tax on approved securities and bonds be reduced to 20% to encourage the secondary market for securities and bonds.

(J) To allow repair and maintenance expenses at the rate of 30% of annual value in case of approved commercial buildings and rented out for commercial purpose.
(k) To allow the company assessees to avail
thernseves of the self-assessment facility, the
requirement to show increase of income by 10% every year be reduced to 5%.

(I) Also to empower the Board to choose any return for audit out of the self-assessment returns submitted by the individual and company assessees,

Mr. Speaker,

11. Tax holiday and tax exemption shrinks the tax base. Yet, tax holiday and tax exemption facilities have been allowed to continue for a long time in the interest of industrialization. Now-a-days, it is considered more logical a.i effective to adopt a discounted rate of tax for a definite peru of time at the initial stages of the newly setup industries as alternative to tax holiday or tax exemption. This has be' recommended by the Revenue Reforms Commission. T~ holiday period will come to an end in 2005. So, we a considering introduction of a system of taxing the newly set-i industries as recommended by the Revenue Reforr Commission at a reasonably discounted rate instead of furth extending the tax-holiday period.

Mr. Speaker,

12. With a view to enforcing discipline in the the management by proper application of tax laws together wi increased monitoring and effective enforcement of laws ai regulations, I am now presenting some proposals before ti
Parliament:

(a) To encourage the taxpayers to submit returns time and discourage delay, the initial penalty of Tk. SOC be raised to 10% of the last assessed income with minimum of TIc. 2,500/- and in case of continued defau Tk. 25 0/- for each day of default.

(b) To discourage the habit of delaying payment income tax by filing appeals to the Tribunal again appeal orders, provisions to be made mandatory f payment of 15% of the difference between the demai arising out of the appeal order md the admitted t~ liability by the assessees before filing appeal to ti Income Tax Appellate Tribunal. The Commissioner

9. Taxes be also empowered to reduce this amount on reasonable grounds.

(c) At present, the responsibilities of executing the income tax laws and rules rest on the Zonal Tax Commissioners. Being busy with their daily routine work, they find it difficult to detect tax evasions and take appropriate legal measures to punish the evaders and defaulters. A separate Directorate is to be setup in the Taxes Department to exclusively enforce the laws and rules to check tax evasion, monitor irregularities in tax deductions at source, its timely deposit and to ensure prompt deposit and collection of taxes.

(d) Taxpayers are respected in society. It would be appropriate to give recognition- to the top income tax payers. To implement this, ten top tax payers each from individuals, private-limited companies and public limited companies be awarded the status of C,I.P every year.

Mr. Speaker,

13. During the initial year of the current tenure of the government we launched an organized survey programme with the aim of expanding the tax base by identifying new assessees. Till end of May 2004 potential taxpayers numbering 2,40,000 have been identified and registered bringing the total number of assessees to 15,50,000. The survey programme would continue with the target of identifying further 3,00,000 new assessees during the year 2004-2005.

14. Office of the Tax Ombudsman has recently be set up in a number of countries to settle tax-complaints and the demand. I have already taken steps to introduce 'Ombudsman'. I hope to place the Tax Ombudsman Bill to to parliament during the next fiscal year.

For Previous Budgets Click Here

 Back  Home Top |Print this page

© Copyright and Fair Use . SDNP Bangladesh holds the © copyright to its publications and web pages but
encourages duplication of these materials for noncommercial purposes. Proper citation is required. 
Sustainable Development Networking Project (SDNP)
E-17 Agargaon, Sher-e-Bangla Nagar, Dhaka-1207, Bangladesh. Email: [email protected]