Tax structure to hit middle income group hard

The new tax structure framed in the proposed budget for FY 2017-2018 has burdened the existing taxpayers, particularly those falling in the middle-income bracket. Proposals to impose excise duty on bank accounts, air travel tickets, 15% VAT on English medium schools and additional 10% supplementary duty on fast food items imply coming down hard on the expenditure of the aspirational middle income group. According to a 2015 study by the Bangladesh Institute of Development Studies (BIDS), 20% of Bangladeshis are now in the middle income bracket. By 2025, this number will capture one-quarter of the population and by 2030, about one-third. A person belongs to the middle-class category when his/her income ranges between $2 and $3 per day. The Finance Ministry and the National Board of Revenue (NBR) has targeted hose sectors from where taxes can be realised comparatively easily. Increased duty on air tickets and bank accounts means the government is burdening the existing taxpayers in spite of increasing the tax net. The Finance Minister also proposed to impose 10% supplementary duty (SD) on fast food items at the supply stage, on which 15% VAT is already applicable. Who else are the consumers of fast food other than the middle income people? In addition, 15% VAT on English medium schools would create stress on the middle-income group over the expenditure of their children's education. “When a country on the verge of graduating to a middle income one, the citizens expect to have better health services, schooling facility for children, tourism and other services. But has the new tax structure been planned keeping up with the essence?” questioned noted economist Debapriya Bhattacharya. Talking to the Dhaka Tribune, the Centre for Policy Dialogue (CPD)Distinguished Fellow noted: “The middle income group is energetic and industrious. Across the globe, this group takes the world forward. In a middle income country, there is an aspirational group and the government will have to create markets and service for them.” “Our (CPD's) position on excise duty on bank accounts was to lower it to Tk500 up to Tk1,00000 to lower the tax burden on the lower-middle income people,” said Debapriya Bhattacharya. In the proposed budget of Tk400,266 crore, the government has set target to earn Tk2,48190 crore from NBR tax. It is 62%  of the total budget. Tk91,344 crore or 36.8% of the total NBR tax will come from VAT.