Reviewing new fiscal proposals
Friday, 18 June 2010
Masih Malik Chowdhury
CAPITAL gain on profit of share sale under the new fiscal proposals for the forthcoming financial year (FY) is to be fixed at 10% for institutions. And it is proposed 5.0% for shareholders and directors of the listed companies. Individuals would not come under the ambit of proposed capital gains tax. Against this the provision of 32 (7) that reads like:
"Notwithstanding any thing contained in this section or section 31, where a capital gain arises from transfer of a capital asset being Govt. Securities and stocks & shares of public companies listed with stock exchanges in Bangladesh."
But the Finance Bill in Clause 31 has dropped "and stocks and shares of public companies listed with stock exchanges in Bangladesh. "
This is against the spirit of budget speech and 32(7) should continue as, "except exemptions of capital gain tax proposed by Finance bill 2010/2011."
VAT on CA firms: In order to generate resources from domestic sources, the scope for Value Added Tax (VAT) has been proposed to be extended. Under a self-regulated arrangement, it is otherwise ideal and there is no way out. Indeed the Chartered Accountants (CAs) are subject to 10% Advanced Income Tax (AIT) and VAT payments at 15% (up from 4.5% to 30% value addition) this is unbearable for all professionals. A professional firm's receipts are largely spent on execution and salary of professionals. The VAT at 15% over 10% AIT do not meet the ends of justice. It needs revisions either to 4.5% as before, or AIT at 10% needs to be withdrawn or waived.
AIT on apartment: On sale of apartment AIT @ Tk. 2,000 to Tk. 800 per squaremetre (sqm) has been proposed on registration. While this is appreciated as developers make huge profit leading to a galloping hike in the prices of flats. Also this has to be directly paid by developers. A modus operandi needs to be chalked out so that such payments are not passed on to flat buyers who are already subjected to many levies.
Fake TIN: There are reportedly a large number of fake TIN holders in various avenues. The onus of fake TINS must lie also on the related tax circles not on the taxpayers alone. Criminal offences must be dealt with accordingly.
AIT rate increase: Increase in rates of AIT is an improvement as far as domestic resource mobilization is concerned. The rate increases have not been rational as in the case of stock brokers it has been a flat rise of 300% while the rise is proportionately less in other cases.
R&D in NBR: The crying need of research and development (R&D) in National Board of Revenue (NBR) has remained unfulfilled for long. The proposed budget has been silent on this issue. 'Digital' upgrading of tax offices, software and automation are, however, welcome measures. But this could all be done under 'R&D' of NBR including the a long-waited simple IT return form etc.
Abuse of tax holiday: The scope for availing tax holiday facility is often misused by offices concerned. Quite often sectors outside the ambit for tax holiday avail this facility unduly in connivance with office / chair concerned. Strong monitoring like a certificate for classification of the industry by Ministry of Industries or that by a financing bank can serve to check such misuses.
NBR & Tax Office expansion: The human resource (HR) and capacity of NBR needs expansion. The revenue collecting offices should be run commercially and not by fiats or enforcement only. But the Deputy Commissioner of Taxes (DCTs) assessing offices are running short of trained personnel in both quality and quantity.
The discretion of enforcement by assessing officers should be curtailed and limited and motivation will lead to more revenue. This fact should be taken into due cognizance.
Tk. 60 million, for motivation: An amount of Tk. 60 million (6 crore) has been allocated for motivation of tax payers. While tax payers are often penalised and unduly taxed by the officials concerned, penalties should alike be imposed on such errant tax officials. Application of discretion should be promotive and not a determent to tax collections.
TIN of guardians of students in education institutions: The guardians of students in English medium educational institutions or private universities should be brought under TIN net. All school and college admission can have TIN number references of concerned guardians as VAT has already been paid by all students.
Coaching Centres: There are may coaching centres in Dhaka and elsewhere. These centres enroll students up to 800 in number at a monthly fee of Tk. 3000 to Tk. 5000. Their income is often Tk 3.0 million (30 lakh) per month.
A measure should be evolved to bring them under tax network. A licensing system of coaching centres can be evolved and they should also be brought under a regulatory regime.
Accountability and transparency for tax collection: The proposed budget is silent about, and indifferent to, tax collectors' accountability & transparency about wealth and income. The first task should be getting the statement of wealth of the assessing officers with full accountability & transparency.
Welcome measures: The plan and measures for expansion of TIN net is praise-worthy. However, the NBR & its R&D cell can pivot it for a larger effective TIN net. The Prime Minister and her team deserve compliments from all concerned for demonstrating their pragmatic approach. But then they should effectively execute the plan.
VAT expenses: The figures of sale as per VAT registration must be accepted verbatim. Clients who have paid VAT per registration number should not be harassed by others. Income tax offices often come up with a projection of large receipts. Because of such problems, assessees go for litigation and a huge amount of tax revenues remain outstanding and unrealised for years after years. So the scopes of alternative dispute resolution (ADR) have been rightly spelt out in the budget speech but options for pre-ADR settlements should be first preferred.
The writer can be reached at email: info@masihmuhith.com
CAPITAL gain on profit of share sale under the new fiscal proposals for the forthcoming financial year (FY) is to be fixed at 10% for institutions. And it is proposed 5.0% for shareholders and directors of the listed companies. Individuals would not come under the ambit of proposed capital gains tax. Against this the provision of 32 (7) that reads like:
"Notwithstanding any thing contained in this section or section 31, where a capital gain arises from transfer of a capital asset being Govt. Securities and stocks & shares of public companies listed with stock exchanges in Bangladesh."
But the Finance Bill in Clause 31 has dropped "and stocks and shares of public companies listed with stock exchanges in Bangladesh. "
This is against the spirit of budget speech and 32(7) should continue as, "except exemptions of capital gain tax proposed by Finance bill 2010/2011."
VAT on CA firms: In order to generate resources from domestic sources, the scope for Value Added Tax (VAT) has been proposed to be extended. Under a self-regulated arrangement, it is otherwise ideal and there is no way out. Indeed the Chartered Accountants (CAs) are subject to 10% Advanced Income Tax (AIT) and VAT payments at 15% (up from 4.5% to 30% value addition) this is unbearable for all professionals. A professional firm's receipts are largely spent on execution and salary of professionals. The VAT at 15% over 10% AIT do not meet the ends of justice. It needs revisions either to 4.5% as before, or AIT at 10% needs to be withdrawn or waived.
AIT on apartment: On sale of apartment AIT @ Tk. 2,000 to Tk. 800 per squaremetre (sqm) has been proposed on registration. While this is appreciated as developers make huge profit leading to a galloping hike in the prices of flats. Also this has to be directly paid by developers. A modus operandi needs to be chalked out so that such payments are not passed on to flat buyers who are already subjected to many levies.
Fake TIN: There are reportedly a large number of fake TIN holders in various avenues. The onus of fake TINS must lie also on the related tax circles not on the taxpayers alone. Criminal offences must be dealt with accordingly.
AIT rate increase: Increase in rates of AIT is an improvement as far as domestic resource mobilization is concerned. The rate increases have not been rational as in the case of stock brokers it has been a flat rise of 300% while the rise is proportionately less in other cases.
R&D in NBR: The crying need of research and development (R&D) in National Board of Revenue (NBR) has remained unfulfilled for long. The proposed budget has been silent on this issue. 'Digital' upgrading of tax offices, software and automation are, however, welcome measures. But this could all be done under 'R&D' of NBR including the a long-waited simple IT return form etc.
Abuse of tax holiday: The scope for availing tax holiday facility is often misused by offices concerned. Quite often sectors outside the ambit for tax holiday avail this facility unduly in connivance with office / chair concerned. Strong monitoring like a certificate for classification of the industry by Ministry of Industries or that by a financing bank can serve to check such misuses.
NBR & Tax Office expansion: The human resource (HR) and capacity of NBR needs expansion. The revenue collecting offices should be run commercially and not by fiats or enforcement only. But the Deputy Commissioner of Taxes (DCTs) assessing offices are running short of trained personnel in both quality and quantity.
The discretion of enforcement by assessing officers should be curtailed and limited and motivation will lead to more revenue. This fact should be taken into due cognizance.
Tk. 60 million, for motivation: An amount of Tk. 60 million (6 crore) has been allocated for motivation of tax payers. While tax payers are often penalised and unduly taxed by the officials concerned, penalties should alike be imposed on such errant tax officials. Application of discretion should be promotive and not a determent to tax collections.
TIN of guardians of students in education institutions: The guardians of students in English medium educational institutions or private universities should be brought under TIN net. All school and college admission can have TIN number references of concerned guardians as VAT has already been paid by all students.
Coaching Centres: There are may coaching centres in Dhaka and elsewhere. These centres enroll students up to 800 in number at a monthly fee of Tk. 3000 to Tk. 5000. Their income is often Tk 3.0 million (30 lakh) per month.
A measure should be evolved to bring them under tax network. A licensing system of coaching centres can be evolved and they should also be brought under a regulatory regime.
Accountability and transparency for tax collection: The proposed budget is silent about, and indifferent to, tax collectors' accountability & transparency about wealth and income. The first task should be getting the statement of wealth of the assessing officers with full accountability & transparency.
Welcome measures: The plan and measures for expansion of TIN net is praise-worthy. However, the NBR & its R&D cell can pivot it for a larger effective TIN net. The Prime Minister and her team deserve compliments from all concerned for demonstrating their pragmatic approach. But then they should effectively execute the plan.
VAT expenses: The figures of sale as per VAT registration must be accepted verbatim. Clients who have paid VAT per registration number should not be harassed by others. Income tax offices often come up with a projection of large receipts. Because of such problems, assessees go for litigation and a huge amount of tax revenues remain outstanding and unrealised for years after years. So the scopes of alternative dispute resolution (ADR) have been rightly spelt out in the budget speech but options for pre-ADR settlements should be first preferred.
The writer can be reached at email: info@masihmuhith.com