Readjusting tax threshold
Thursday, 5 June 2008
PEOPLE'S earning, measured in Taka, has been eroding its value fast. In this situation, the businessmen or professionals may well offset the impact of plummeting purchasing power of Taka in their lives through increasing the amount of their incomes by raising the price of the commodities or the services they sell. But the people falling under the fixed income bracket and the poor without a regular source of income have no means to compensate for it. The service holders in both public and private sectors belong to this group. Their employers do not increase the amount of their paycheques in keeping with the price of the commodities in the market and their employers are of course in no position to do that if their organisational earnings do not record any growth. As a result, the service-holders become the worst sufferers.
However, the cost of living has been on the rise since long due to overall rise in the standard of living. People from every walk of life were adjusting to it slowly. But the problem they have been facing lately is of a quite shocking kind. The price of food grains and other essential commodities have spiked in an unprecedented fashion in both local and international markets. Bangladesh has again been at the receiving end. Food-related inflation in particular has had the people with their back to the wall. When calculated in economic terms, this has led to an average yearly inflation of 10 per cent, while on the point to point basis, the food related inflation has risen to as high as 15 per cent. Both these figures are semi-official ones. Unofficial estimates put the rate of inflation, particularly relating to food items, at a much higher level. Addressing the problem of soaring prices, as far as it affects the lives of the fixed income group is presently a daunting challenge to the policy-planners of the government.
Against this backdrop, voices from different cross sections of the people are being raised in favour of moving up the present ceiling of the taxable income. That is because, with the exemption ceiling of taxable incomes in the next fiscal remaining at the same level as that of the outgoing fiscal will mean further erosion in real incomes of the taxpayers at a time when the rate of inflation remains at a record high during the last two and a half decades. The inflationary pressure has already brought down the value of their incomes a few notches lower. In this situation, how can one expect that they would continue to pay their income tax at the existing rates? The concern of the fixed income people in this regard has been brought to the fore following hints from the government level that the tax exemption ceiling in the next budget might not see any upward adjustment. But this is a serious issue for the incumbent caretaker government which is going to present the budget to the nation for the second time.
While appreciating the government's enhanced drive to raise its revenue earning through bringing more people under the tax net, one needs also to point it out that the tax should reflect the people's real level of income. But the existing thresholds of income tax hardly reflect the reality, especially after the incomes of the people nose-dived in reverse proportion to the phenomenal rate of inflation during the last one year in particular. The government is certainly alive to this emerging reality. Necessary readjustment in the ceilings of the taxable incomes would not be any favour for the taxpayers. On the other hand, it would only be an honest official recognition of the falling income level of the people. And in that case, if addressed accordingly, it would also make a lot of economic sense. In this context, it is worth noting that income tax is not just about increasing the government's revenue income, rain or shine. Enhanced public participation in the effort has also to be ensured. All concerned would, therefore, express the hope at this stage that the government would take note of the demands made by various quarters to enhance the present level of minimum tax threshold from Tk 150,000 to, at least, Tk 200, 000.
However, the cost of living has been on the rise since long due to overall rise in the standard of living. People from every walk of life were adjusting to it slowly. But the problem they have been facing lately is of a quite shocking kind. The price of food grains and other essential commodities have spiked in an unprecedented fashion in both local and international markets. Bangladesh has again been at the receiving end. Food-related inflation in particular has had the people with their back to the wall. When calculated in economic terms, this has led to an average yearly inflation of 10 per cent, while on the point to point basis, the food related inflation has risen to as high as 15 per cent. Both these figures are semi-official ones. Unofficial estimates put the rate of inflation, particularly relating to food items, at a much higher level. Addressing the problem of soaring prices, as far as it affects the lives of the fixed income group is presently a daunting challenge to the policy-planners of the government.
Against this backdrop, voices from different cross sections of the people are being raised in favour of moving up the present ceiling of the taxable income. That is because, with the exemption ceiling of taxable incomes in the next fiscal remaining at the same level as that of the outgoing fiscal will mean further erosion in real incomes of the taxpayers at a time when the rate of inflation remains at a record high during the last two and a half decades. The inflationary pressure has already brought down the value of their incomes a few notches lower. In this situation, how can one expect that they would continue to pay their income tax at the existing rates? The concern of the fixed income people in this regard has been brought to the fore following hints from the government level that the tax exemption ceiling in the next budget might not see any upward adjustment. But this is a serious issue for the incumbent caretaker government which is going to present the budget to the nation for the second time.
While appreciating the government's enhanced drive to raise its revenue earning through bringing more people under the tax net, one needs also to point it out that the tax should reflect the people's real level of income. But the existing thresholds of income tax hardly reflect the reality, especially after the incomes of the people nose-dived in reverse proportion to the phenomenal rate of inflation during the last one year in particular. The government is certainly alive to this emerging reality. Necessary readjustment in the ceilings of the taxable incomes would not be any favour for the taxpayers. On the other hand, it would only be an honest official recognition of the falling income level of the people. And in that case, if addressed accordingly, it would also make a lot of economic sense. In this context, it is worth noting that income tax is not just about increasing the government's revenue income, rain or shine. Enhanced public participation in the effort has also to be ensured. All concerned would, therefore, express the hope at this stage that the government would take note of the demands made by various quarters to enhance the present level of minimum tax threshold from Tk 150,000 to, at least, Tk 200, 000.