Wealthy individuals may face higher taxes next year as the National Board of Revenue (NBR) wants to increase the surcharge on their income taxes in the budget for the next fiscal year, finance ministry officials said.
An official of the ministry told The Business Standard that the NBR is likely to propose a 5-10 percentage points increase on the existing surcharges.
A 14-member NBR delegation led by its Chairman Abu Hena Md Rahmatul Muneem placed the proposal, among others, to Finance Minister AHM Mustafa Kamal at a meeting at the Secretariat yesterday, the official, who was present at the meeting, told TBS.
The surcharge on income tax payable by wealthy individuals now varies between 10% and 35%.
At present, the surcharge for individual taxpayers whose asset limit is between Tk10 crore and Tk20 crore is 20%. For those with assets between Tk20 crore and Tk50 crore, the rate is 30%. Taxpayers with assets exceeding Tk50 crore have to pay a surcharge of 35%.
The minimum 10% surcharge is payable for individuals owning more than a vehicle or a residential property of more than 8,000 square feet.
Analysts have welcomed the NBR move, saying the super-rich should be taxed more to reduce inequality.
“We will appreciate an increase in the surcharge as it will help reduce income and asset inequality as well as increase revenue,” Professor Mustafizur Rahman, distinguished fellow at Centre for Policy Dialogue, told The Business Standard.
“According to the latest BBS data, income and asset inequality have increased significantly. So, we need to concentrate on equity.”
The economist also emphasised revisiting tax rates and slabs for individual taxpayers to effectively curb inequality.
The government reduced the upper cap of income tax on individuals to 25% from 30% in FY21 amid the outbreak of Covid-19, which benefited the rich and further fueled income inequality.
Talking to TBS, economist Ahsan H Mansur also expressed opinion in favour of increasing taxes on wealthy people. “It will decrease existing inequality,” he said.
“In the given economic situation, wealthy people should take responsibility, and pay higher taxes. From this ground, it is rational to increase the surcharge,” Md Alamgir Hossain, former revenue board member for tax policy, told TBS.
Such an additional tax existed even before the country’s independence, he noted and added that it was then called wealth tax. In 1996, the government rescinded it and introduced the surcharge in FY11 as an alternative. Initially, the surcharge was applicable on individuals having assets worth above Tk2 crore, which was later increased to above Tk3 crore.
Only 15,000 pay surcharge
According to the revenue board, some 15,000 taxpayers paid the surcharge in FY21. It was Tk600 crore in amount.
Economists said the number of surcharge payers is not rational at all when it comes to the country of 17 crore people. “The number is ridiculous. The NBR should work further to identify all the wealthy people,” Professor Mustafizur Rahman said.
NBR officials said wealthy people are low in number because of evaluation methods which allow valuing assets at purchase price, not market rates.
“Valuation of assets at purchase price is rational because it is related to income tax. If we consider market values and taxpayers do not have income from their assets, they will have to sell their assets to pay taxes, which is not logical,” Alamgir Hossain explained.
