Finance bill passed: 15% tax for undisclosed money prevails

Despite substantial criticism from economists, trade bodies, and civil society organisations, the Finance Bill 2024 has been passed in parliament retaining the scope for whitening undisclosed money by paying only a 15% tax for businesses and high-income individuals.

Given the high inflation, people expected that Finance Minister Abul Hassan Mahmood Ali would provide some relief by increasing the tax-free income limit during the approval of the finance bill today. However, it did not bring any good news for a large number of taxpayers.

Additionally, the bill reversed the plan to raise the tax rate on high-income individuals starting from the tax year 2024-25, which corresponds to the income year 2023-24.

On the other hand, the finance bill exempts corporate companies and government authorities from paying the environmental surcharge on second vehicles – SUVs and cars. However, it imposes this tax burden on individual taxpayers for owning second vehicles, during registration and renewal.

Moreover, Prime Minister Sheikh Hasina advised the ministry to revise the tax and duty benefits for economic zones and hi-tech park investors to attract foreign direct investment (FDI).

She said in the parliament, "To continue local and foreign investment, to present Bangladesh abroad as an attractive destination for investment, and to maintain policy consistency, all facilities should continue as before."

She also directed the finance minister not to impose 1% duty on the import of construction materials, capital machinery, and machinery parts.

Sheikh Hasina said that high-tech parks and economic zones approved by 30 June 2024 will continue to enjoy the current tax holiday facility. Additionally, any newly registered high-tech parks and economic zones in Bangladesh that begin commercial operations by 30 June 2025, will also receive a 10-year tax holiday, she said.

Mukitul Hasan, second secretary of the customs policy wing of the National Board of Revenue (NBR), stated that the NBR will issue various SROs today to maintain the previous zero-duty facility for economic zones and high-tech parks.

Black money whitening facility

The finance bill has not brought any changes to the provision for whitening undisclosed money by paying only a 15% tax.

The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), the apex trade body of the country's businesses, has recommended that the controversial amnesty be extended exclusively to organisations, not individuals.

The apex business body emphasised that income declared under this provision must come from legal sources.

MPs duty-free vehicle import facility to continue 

Members of parliament may continue enjoying the duty-free vehicle import facility despite the finance minister's suggestion to revoke it in the proposed budget for the fiscal year 2024-25.

However, it is unlikely that the MPs' duty-free vehicle import facility will be revoked this time, as no bill has been presented in parliament to amend the current rules.

Environmental surcharge for individuals 

The government has backtracked on its decision to impose an environmental surcharge on the second vehicle owned by government authorities, departments, and private companies. However, according to the finance bill, the additional tax burden will be applicable to second vehicles—SUVs and cars—owned by individuals during registration and renewal.

However, experts and economists said if government and company vehicles are exempted from environmental surcharge, the aim of revenue realisation from this sub-sector will not be successful. If the government really wants to consider climate change and environmental issues, it should take some measures to impose direct tax like the developed countries.

Super rich spared of new 30% income tax rate

The government has given relief to high-income individuals from the 30% income tax rate for the tax year 2024-25, as proposed in the finance bill, which corresponds to the income year 2023-24.

According to the finance bill, the current highest income tax slab rate of 25% for the high-income individuals will remain unchanged for the tax year 2024-25, but it will increase to 30% starting from the tax year 2025-26. 

Additionally, the finance bill includes a provision that refrains from auditing tax files if the tax return shows an income increase of up to 15% compared to the previous year.

Mandatory tax filing proof for renting community centres relaxed

The finance bill also partly relaxed the condition of showing proof of submission of tax returns for renting community centers or venues for weddings and other events. 

Under the new rules, starting next fiscal year, proof of income tax filing will be required only for renting community centres in the eight city corporations. This requirement will be relaxed for urban and rural areas outside these corporations.