Originally posted in The Business Post on 19 September 2024
INCOME TAX DISPARITY
Govt employees enjoy tax benefits while pvt sector get none
Experts have collectively noted that the government service holders, constitutional post holders and the judiciary are the highest beneficiaries of the current income tax law. They have noted this disparity as unconstitutional and urged reforms as all citizens are equal, hence, the laws must be equally implemented on all.
The taxation experts expressed that the current income tax law, which recently received the parliamentary nod, blatantly encourages a barrier towards ensuring equal opportunities for all as there are special tax benefits given to the post holders in question.
Article 27 of the Bangladesh Constitution clearly states “All citizens are equal before the law and are entitled to equal protection of the law.”
Despite this constitutional remark, the incumbent tax law gives tax exemptions for the government officials on their income while the private sector employees are being deprived from any facilities. Although, the number of private sector employees is much higher in count than that of the government employees, the experts said.
AL appeasing the favoured
The experts have also explained that the previous administration, the ousted Awami League (AL) reign, made several unfair and biased decisions to appease these favoured groups, but now is the right time to eliminate these disparities.
According to the current income tax law, government officials are taxed on their basic salary and festival allowances, while income earned during employment, as well as retirement benefits, are exempt from taxes.
Under the Income Tax Act 2023, several sources of income for government officials are exempt from taxation including: pensions, endowments, recognised provident funds, superannuation funds, amounts received during voluntary retirement, and interest or profits from pensioners’ savings certificates.
Similarly, the post holders of prime minister, speaker, ministers, deputy speaker, and members of parliament (MPs) are only required to pay income tax on their basic salary or remuneration, with all other earnings remaining tax-free. Even The judiciary also enjoys similar exemptions.
The National Board of Revenue’s (NBR’s) tax wing, through the issuance of a Statutory Regulatory Order (SRO), has exempted the above-mentioned constitutional post holders from the common tax bracket.
Additionally, through another separate SRO, similar tax exemptions have been extended to the chief justice, justices of the Appellate Division of the Supreme Court, and judges of the High Court Division.
In contrast, income earned by private-sector employees has been kept within the ambit of income tax.
Absolutely unacceptable
Experts argue that applying two different sets of tax laws within the same country contradicts our constitutional principles, fosters discrimination, undermines justice, and is largely driven by political interests.
Labelling the inequality in current tax policy as absolutely unacceptable, the stakeholders noted that the ministers and MPs perform their duties as public servants and are also citizens of this country.
They said that this tendency to take unethical benefits like these is discriminatory and creates negative perception among the taxpayers, they added.
Barrister Jyotirmoy Barua, a lawyer at the Supreme Court, told The Business Post, “The previous government implemented these separate benefits for political purposes. I believe it is now the right time to initiate steps to revoke them.
“The incumbent government has no obligation to maintain these privileges. The proposal to abolish them is entirely justified, as such discriminatory practices should not continue,” he added.
Barua also emphasised the need for greater transparency, particularly within the judiciary. “Why should judges enjoy special privileges while serving in such a critical judicial role? In fact, they have an even greater responsibility to pay taxes and be transparent in these matters,” he said.
Hasina snuffs
Although, the NBR’s tax policy wing, when it was preparing the national budget for the current fiscal year (2024-25), proposed removing the permanent tax exemption on the income of constitutional office holders and political parties, the ousted prime minister Sheikh Hasina snuffed the proposal to keep appeasing the systemic bureaucratic favouritism.
By abusing such tax benefits, MPs can import cars without paying any duty. However, the general taxpayers have to pay duties ranging between 89 to 850 per cent.
For an example, if the price of a car is Tk1 lakh, then at least another Tk 89,000 as duty for the import and if the maximum rate is imposed, the duty stands at a staggering Tk 8.50 lakh. A cost which MPs have the luxury of not paying.
On the suggestion of the International Monetary Fund (IMF), the NBR proposed imposing a 25 per cent customs duty and a 15 per cent Value Added Tax (VAT) on car import by MPs in the current fiscal budget. This proposal, due to the mismanagement of the AL regime, did not see the light.
According to NBR data, MPs imported a total of 316 vehicles under duty-free facilities during the years of 2017 to 2023. The price of these cars stood at Tk 260 crore. If the maximum 850 per cent duty had been applicable, the government would not have lost Tk 2,210 crore in direct revenues.
Dr Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), told The Business Post, “Taxes should be paid by everyone and the rate should be the same for everyone. Any expenditure of the government including salaries and allowances is paid by public money. It is not justified to take income tax rebate on public money.”
Alleging that the political leadership always enacts laws for their own benefits, Fahmida further mentioned, “When any government policy is made, it applies equally to government officials and those in government placements. If it is different for the common people, it is discriminatory.”
AKM Badiul Alam, member (Tax Policy of the NBR) told The Business Post, “We have already identified some discriminatory provisions in the tax law and will try to remove these in next budget proposal. If the government agrees with us, the disparity will not exist in future.”