The proposed national budget for 2016-17 envisions an expenditure outlay of Tk3,40,605 crore, 29% higher than the outgoing fiscal’s revised outlay. However, the revenue earnings estimate for the next fiscal is Tk2,42,752cr, about 37% higher than the revised figure of Tk1,77,400cr for the outgoing fiscal.
Around 71% of the expenditure outlay is expected to be covered by revenue earnings. The size of the formal GDP, at current market price, is estimated to be Tk19,61,000cr, which was estimated at Tk17,16,000cr in the outgoing fiscal.
Out of the total revenue collection target in the coming fiscal, NBR-sourced income is estimated at Tk2,03,152cr, which is 35% higher than the revised figure for 2015-16, and such high levels of estimation without the proper instruments -- ie an effective automation system, capable NBR architecture, reduction in harassment by tax people,etc -- is likely to push the NBR into collecting revenue in any way it can.
However, it’s good to know that the NBR has achieved its revised revenue target of Tk1,30,000cr, with a surplus of Tk3,000cr during the July 2015 to May 2016 period. It is also good to note that the NBR thinks its revised revenue target of Tk1,50,000cr for the outgoing fiscal is likely to be exceeded by Tk10,000cr, though it will fall short from the Tk1,76,000cr as was originally planned.
The strategy of the proposed budget focuses on the mobilisation of larger domestic resources through the expansion of the tax base, establishing social equity through reduction of income inequality, protection and development of our domestic industries, incentives for savings and investment, development of small and medium enterprises, and discouraging the import of luxury goods.
These goals are pretty similar to the earlier budgets and usual are for an emerging economy such as Bangladesh.
The NBR’s laundry list also seems to be fairly in line with what was being discussed in various forums in recent days: Reduction of personal interface between tax-payers and the tax administration, reduction of the discretionary power of tax officials, reduction of tax disputes through alternate dispute resolution (ADR), developing tax-payer-friendly procedures, reduction of harassment and encouraging tax payment, and, most importantly, increasing the use of IT within the tax administration.
Income tax
The revised target for income tax in the outgoing fiscal is Tk51,796cr. In light of a better opportunity space and increased focus, the figure has been proposed to be increased by almost 39%, to Tk71,940cr, in the coming fiscal.
The government proposed October 30 to be Tax Day, ie the due date for filing of returns by all individual assessees. Income threshold for the exemption of SMEs engaged in production increased to Tk36 lakh from Tk30 lakh
Changes are sought to be brought in 46 sections and three schedules of the Income Tax Ordinance by the Finance Bill 2016.
Though the threshold of tax-free income limit of individuals remain unchanged at Tk2,50,000, by reducing the investment limit from 30% to 20% of total income, and investment rebate from a flat 15% to around 10%, individual tax-payers earning Tk40,000 to Tk1,00,000 will be penalised with a heavy tax burden.
Additionally, through the modification of Section 82C, the procedure of claiming refunds on various deductions at sources, ie from savings certificate, motor vehicles, etc, has been discontinued.
This will increase the tax burden through the non-adjustment of refunds in the following years, when the assessee needs an additional tax payment.
From now on, a year-end tax liability of tax-payers can’t be less than the total tax deduction at source.
Again, imposing tax on the income of provident fund, gratuity, and workers’ profit participation funds will increase the tax liability of an assessee.
The corporate tax rate remained unchanged, except for RMG companies, which has been reduced from 35% to 20%, but tax deduction at source (TDS) on export proceeds has been increased from 0.6% to 1.5%. This is likely to give a good break to the RMG owners.
Under the new budget, the cost of doing business is likely to increase due to some amendments in the ordinance. There are various increments in the rate of tax deduction which companies can’t claim and adjust with the tax liability of following years, as the tax liability of a particular year can’t be less than the total tax deduction at source in that year.
The NBR now prescribes a minimum tax with enhanced rates ranging from 0.6% to 1.0%.
As per amendment, income tax at source has to be deducted on the invoice price, inclusive of the VAT amount, which ultimately has to be borne by the company pushing their business costs. Furthermore, tax-payers are afraid of the introduction of an audit of a half-yearly with-holding tax return.
The government proposed October 30 to be Tax Day, ie the due date for filing of returns by all individual assessees. Income threshold for the exemption of SMEs engaged in production increased to Tk36 lakh from Tk30 lakh.
The limit of perquisite disallowance raised from Tk4,50,000 to Tk4,75,000 (increased to Tk25,00,000 for disabled employees).
Any amount up to Tk10 lakh, with respect to the waiver of the margin loan (for the purpose of investment in shares, debentures, mutual funds, and securities in a stock exchange) or interest thereof, would not be taxable at the hands of the individual assessee holding a trading right entitlement certificate.
The concluding part of this long form will be published tomorrow.
