Rescinding wealth tax surcharge
Monday, 9 January 2012
The government has recently introduced a surcharge of 10 per cent tax on wealth owned by an individual in excess of Tk 20 million. The wealth includes shares owned in private limited companies. I believe that while the objective might have been to reduce the wealth gap between the rich and the poor, the policy should be revised to exclude wealth locked up in private limited companies in the form of paid-up capital.
The new tax is likely to hinder the shareholders of a private limited company to formally reinvest profits in the form of paid-up capital. Instead they may choose to leave the profits to accumulate in retained earnings year after year to avoid this new form of personal tax. It must be understood that private limited companies are already taxed and so are dividends paid to shareholders. So why tax for the third time?
In a developing country like Bangladesh, the government should encourage the establishment of SMEs and help them grow into financially powerful organisations able to employ hundreds and thousands of people and compete globally. There is a shortage of entrepreneurs the world over and governments usually try to woo them with all types of incentives. Here it seems that while the government may have had good intentions, this new type of wealth tax in its current form will hinder private limited companies to formally grow by increasing their paid-up capital.
The government should therefore reassess this policy and reverse it for the sake of economic development.
Syed Mamnun Quader
Banani, Dhaka
E-mail: syedquader@yahoo.com
The new tax is likely to hinder the shareholders of a private limited company to formally reinvest profits in the form of paid-up capital. Instead they may choose to leave the profits to accumulate in retained earnings year after year to avoid this new form of personal tax. It must be understood that private limited companies are already taxed and so are dividends paid to shareholders. So why tax for the third time?
In a developing country like Bangladesh, the government should encourage the establishment of SMEs and help them grow into financially powerful organisations able to employ hundreds and thousands of people and compete globally. There is a shortage of entrepreneurs the world over and governments usually try to woo them with all types of incentives. Here it seems that while the government may have had good intentions, this new type of wealth tax in its current form will hinder private limited companies to formally grow by increasing their paid-up capital.
The government should therefore reassess this policy and reverse it for the sake of economic development.
Syed Mamnun Quader
Banani, Dhaka
E-mail: syedquader@yahoo.com