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Thursday, May 22, 2014, Jyaistha 8, 1421, Rajab 22, 1435 Hijri

Tax-free income limit, Planned five-year cap draws flak
Mizanur Rahman
Publish Date : 2014-05-22,  Publish Time : 00:00,  View Count : 422
Taking cue from American economy, the government of Bangladesh is making the limit of tax-free income permanent. From 2014-2015 fiscal year the limit of tax-free income would likely be raised to Taka two lakh fifty thousand (from two lakh twenty thousand now) for five years (to FY 2019-2020).
Economists have strongly criticized this decision of the government. They say it will not be proper to  compare Bangladesh with America.
Budget will have to be formulated taking the people of Bangladesh into consideration and fiscal measures including individual income tax limit have to be adjusted year on year.
About this, Dr. Mohammad Abdul Mazid, former Chairman of National Board of Revenue (NBR) said "There are two types of effect of increasing tax-free income. Because of inflation people get some sort of relief. A large number of tax payers get benefit at this."
He said there is no similarity in the economy of America and Bangladesh. So, it will not be proper to make a permanent or long lasting (ten Year) limit of tax free income.
But it may be wise to make tax-free individual income for shot Time (3-5 years).
Sources in the Finance Ministry said the government is making tax free income limit between 2014-15 and 2019-20 permanent.
The government is going to take this decision in line with the American economy. On the 5th of June Finance Minister Abul Maal Abdul Muhith will give detailed explanation about it. He will place the 2014-2015 budget in parliament then.
At a recent budget discussion, the Finance Minister said in the next budget no scope will be given for making black money white, but individual tax-free income limit will be Taka 285,000 and it will remain so for next ten years.
As his remarks drew widespread criticism, the minister later revised it down to Taka 250,000 and the time limit to five years.
Experts say if tax-free income limit is made permanent on long lasting, the burden on the poor will increase. On the other hand, the rich will be benefitted because tax-free income limit is ascertained on the basis of inflation. Since inflation increases every year the tax-free income limit should also be raised because the government cannot fix people's individual income.
People concerned say if common men's tax-free income limit is not raised in the face of rising inflation the NBR will have to face criticism. Taking this into consideration individual tax-free income limit is being raised from Taka 220,000 to Taka 250,000 in the next budget.
For the next Taka 300,000 one will have to pay 10 per cent tax, 15 per cent on next Taka 400,000 and 20% on the next Taka 300,000 and maximum 25% on the remaining total income.
Although it has been planned to increase limit of tax-free income of individuals the other slabs of tax-structure and rate of income tax will remain unchanged.
Several high officials of the NBR said considering the matter of inflation tax-free income limit has been raised by Taka 30,000 more. Although at this there will be a little negative effect on NBR's revenue collection this decision is being taken as per the advice of the Finance Ministry.
Dr. Salehuddin Ahmed, former Governor of Bangladesh Bank, said "Why permanent tax-free income limit is being made is not known to me."
"Tax-free income limit is formulated on the basis of inflation. But why it is being made permanent for five years is not understandable," He added.

Editor : Iqbal Sobhan Chowdhury
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