Budget 2010-2011 and proposals for revision
Tuesday, 22 June 2010
Mohammed Forkan Uddin
Finance minister has made fiscal proposals in the budget for 2010-11 keeping in mind the vision 20-21 of the government. There is no point in involvement in argument over whether it is an ambitious or not, but one can ask if it aims at the people of the country, majority of whom does not know about it.
Increasing supplementary duty on ceramic, tiles, mosaic, bathtub, sink, basin, commode and other fittings for bathroom will increase the cost the buildings or apartments. This will affect the affordability of the people of middle income group seeking to buy apartments.
Higher tax on real estate companies under section 53FF will again increase the cost of the building or apartment. The tax rate has been increased to Tk. 800 per square meter from Tk. 250 per square meter. Though this provision is applicable to developer the burden will be ultimately shifted to buyers of apartments.
The inflation rate as on March 30, 2010 was 8.8% as said by the finance minister in his budget speech. And this warrants a matching hike of exemption limit of income tax over the present limit of Tk. 1,65,000.
A judicial member has been proposed to head the Appellate tribunal. We welcome the proposal because it might properly address the problems an assessee suffers at the hand of the taxmen. We propose to include a chartered accountant to give a clear understanding about transaction relate matters.
In the section 16 E the premium tax at the rate of three percent may be replaced by ten percent because this premium money can be used to issue bonus share under section 57 of the Companies Act 1994. In the normal course of business, profit is distributed to the shareholders after paying corporate tax. This proposal even will not distort the capital market as this thing will happen before listing on stock exchanges and the company will not lose their interest to float shares in the capital market because they are habituated to pay corporate tax, which is much higher than premium tax.
Proper utilisation of undisclosed money can contribute to the growth of our economy. It is perhaps not wise to give the opportunity to invest the undisclosed money with payment at a lesser rate of tax in the non productive sector like purchase of land and apartment, but it is important to give the opportunity to the people who will invest the undisclosed money in the productive sector like establishment of a new industry. This will help create employment and increase the purchasing power of the people, which will it turn encourage establishment of more industries.
It is very interesting that our finance minister spelled out in his budget speech that there would be no capital gains tax in case of individual earned from stock market but the thing had not been mentioned in the finance bill, which is contradictory and will create confusion.
Imposition of 15% VAT on services provided by chartered accountants is a surprise move when government is always talking about corporate governance and transparency of business houses. This service is pre condition to transparency and corporate governance. Such imposition is a hindrance to these services as most of the companies even do not know why they need audit or accounting services.
Tax on dividend income irrespective of private, public or publicly traded companies may be considered as tax exempted income because the company and individual is separate entity, but in reality a company is paying tax before paying dividend to the shareholders, and again the shareholders are paying tax on that dividend. If someone has only income from dividend and the applicable tax rate is 25% then that person is actually paying tax (37.5+25) 62.5% in case of private limited companies, which is illogical. Such provision is making the shareholders reluctant not to comply with the tax law as this law is reducing their return on investment substantially and compelling shareholders to hide income of the company.
The writer is an ACA and partner, Masih Muhith Haque & Co. Chartered Accountants. He can be reached at E-mail : forkan@masihmuhith.com
Finance minister has made fiscal proposals in the budget for 2010-11 keeping in mind the vision 20-21 of the government. There is no point in involvement in argument over whether it is an ambitious or not, but one can ask if it aims at the people of the country, majority of whom does not know about it.
Increasing supplementary duty on ceramic, tiles, mosaic, bathtub, sink, basin, commode and other fittings for bathroom will increase the cost the buildings or apartments. This will affect the affordability of the people of middle income group seeking to buy apartments.
Higher tax on real estate companies under section 53FF will again increase the cost of the building or apartment. The tax rate has been increased to Tk. 800 per square meter from Tk. 250 per square meter. Though this provision is applicable to developer the burden will be ultimately shifted to buyers of apartments.
The inflation rate as on March 30, 2010 was 8.8% as said by the finance minister in his budget speech. And this warrants a matching hike of exemption limit of income tax over the present limit of Tk. 1,65,000.
A judicial member has been proposed to head the Appellate tribunal. We welcome the proposal because it might properly address the problems an assessee suffers at the hand of the taxmen. We propose to include a chartered accountant to give a clear understanding about transaction relate matters.
In the section 16 E the premium tax at the rate of three percent may be replaced by ten percent because this premium money can be used to issue bonus share under section 57 of the Companies Act 1994. In the normal course of business, profit is distributed to the shareholders after paying corporate tax. This proposal even will not distort the capital market as this thing will happen before listing on stock exchanges and the company will not lose their interest to float shares in the capital market because they are habituated to pay corporate tax, which is much higher than premium tax.
Proper utilisation of undisclosed money can contribute to the growth of our economy. It is perhaps not wise to give the opportunity to invest the undisclosed money with payment at a lesser rate of tax in the non productive sector like purchase of land and apartment, but it is important to give the opportunity to the people who will invest the undisclosed money in the productive sector like establishment of a new industry. This will help create employment and increase the purchasing power of the people, which will it turn encourage establishment of more industries.
It is very interesting that our finance minister spelled out in his budget speech that there would be no capital gains tax in case of individual earned from stock market but the thing had not been mentioned in the finance bill, which is contradictory and will create confusion.
Imposition of 15% VAT on services provided by chartered accountants is a surprise move when government is always talking about corporate governance and transparency of business houses. This service is pre condition to transparency and corporate governance. Such imposition is a hindrance to these services as most of the companies even do not know why they need audit or accounting services.
Tax on dividend income irrespective of private, public or publicly traded companies may be considered as tax exempted income because the company and individual is separate entity, but in reality a company is paying tax before paying dividend to the shareholders, and again the shareholders are paying tax on that dividend. If someone has only income from dividend and the applicable tax rate is 25% then that person is actually paying tax (37.5+25) 62.5% in case of private limited companies, which is illogical. Such provision is making the shareholders reluctant not to comply with the tax law as this law is reducing their return on investment substantially and compelling shareholders to hide income of the company.
The writer is an ACA and partner, Masih Muhith Haque & Co. Chartered Accountants. He can be reached at E-mail : forkan@masihmuhith.com