The New Nation - Internet Edition

Staff Reporter

Centre for Policy Dialogue (CPD), a local think-tank, yesterday proposed the government to raise the income tax exemption limit to Tk 2,00,000 from the existing Tk 1,50,000 considering the current inflationary pressure in the economy. The minimum threshold could be kept at Tk 2,000, it suggested.

Handing over a set of proposals to Finance and Planning Adviser Dr AB Mirza Azizul Islam yesterday in view of the upcoming budget 2008-09, the CPD proposed to consider introducing a 30 per cent dearness allowance on basic salary of all government employees in view of the recent price hike of essentials.

However, the CPD did not make any proposal for thousands of those who are working in the private sector. These private sector employees often become the victims of exploitation at their working places.

A four-member delegation led by Professor Mustafizur Rahman, Executive Director of CPD handed over the proposals to the Finance Advisers. Other members of the delegation were Dr Uttam Deb, Head, Research Division, Dr Fahmida Khatun, Senior Research Fellow and Dr Khondaker Golam Moazzem, Research Fellow.

In view of the rise in house-rent, the CPD proposed that the ceiling of tax-free house rent allowance might be refixed at 60 per cent (currently 50 per cent or Tk 15,000, whichever is lower) of the basic salary.

The current campaign needs to be continued to identify potential tax assesses and broadening tax net. The ambit of the large taxpayer units (LTU) needs to be expanded to enhance opportunities for tax mobilisation.

For dividend income when reinvested, tax may be waived (currently taxed at 10 per cent at source). It may be noted that, non-resident foreign investors in EPZ are already enjoying tax free reinvestment of dividend income.

Given the current depressed investment situation, the CPD suggested that NBR might consider for an extension of tax holiday facilities for industries by another five years as the existing tax holiday scheme is set to expire in June 2008.

Besides, limit of investment allowance may be enhanced to 25 per cent from the existing 20 per cent (in this case existing limit of Tk 250,000 could be enhanced to Tk 300,000 to encourage investment).

Tax on not-for-profit research institutions should be waived since such taxes amounts to tax on knowledge.

Moreover, 4.5 per cent VAT on coaching centers, English-medium schools, private medical and engineering colleges and private universities may be withdrawn. A device needs to be designed so that entrepreneurs of such services have to pay the tax, but are not able to pass the burden on to their clientele.

Taking cognizance of the need to further curtail the population growth rate, government may device an incentive package for all government employees who have only one child.

This could be considered an added advantage in case of promotion and placement.

On corporate income tax, the CPD proposed that corporate credit cards might be introduced in order to distinguish between personal and corporate expenditures. To reduce the possibility of misuse of these cards, use of the corporate credit card may be allowed only against adequate supporting documents/evidence.

Turnover tax limit for SMEs may be revised from annual turnover of Tk 20 lakh to Tk 30 lakh.

On customs duty, the CPD proposed that customs duty on capital machinery and intermediate goods should be reduced considering the recent declining import trends of such items. These rates were increased to 10 per cent and 15 per cent respectively in the budget for FY2007-08.

Supplementary duty (SD) may be enhanced on high-value vehicles and other items generally used by the richer segments of the society. Abolishing the SD on raw materials and components is necessary to ensure interests of the local industries.

Regarding the land price and registration charge, the CPD proposed that the government should decrease high transfer registration cost to reduce propensity to evade tax and to protect the current revenue intake under this head.

It proposed that large agricultural landowners must be brought under the tax net. Simplify land registration procedure.

For export promotion, all dyes, chemicals and other raw materials used in textile sector for the purpose of export may not have more than 5 per cent import duty.

The plastic industry is emerging as a major contributing sector in our foreign earnings. The government should consider providing 10 per cent cash incentives to this industry.

Similarly, in recent years export of jute goods has grown significantly and it is currently enjoying 7 per cent cash incentives. It is proposed that the 7 per cent be increased to 15

per cent.

In order to enhance ship building sector in the country the government should provide bonded warehouse, tax exemption on raw materials and cash incentive facility to this sector. The government should also declare this sector as a thrust sector when announcing its export policy.

Regarding the social sector and social protection schemes, the CPD observed that the amount of money provided for destitute and widow women which is now Tk 220/person per month is too low for the survival of a person especially in the prevailing inflationary period. Allowance for the destitute and widow women may be raised from the current level of Tk 220/person per month to Tk 300/person and coverage should be increased up to 10 lakh from the current 7.5 lakh.

In order to generate employment, the government may consider introducing a Rural Employment Guarantee Scheme for the unemployed. For a beginning, in view of regional disparity, this scheme may be introduced in three Divisions-Rajshahi, Khulna and Barisal. This scheme may seek to provide guaranteed employment to one member of every household below a threshold income level (hard core poor) for at least 100 days a year, especially in the lean (Monga) season. The minimum wage could be Tk 150 per day.

In the last budget Tk 550 crore were allocated for employment generation in rural areas outside the ministry-based employment generation programmes, a portion of which was implemented by Palli Karma Shahayak Foundation (PKSF) through their associate NGOs. This year this amount should be increased for the disaster affected people in the southern Bangladesh.

The government could consider creating a development fund under Ministry of Overseas Employment and Expatriate Welfare for development of skill, language course and other training facilities for workers going abroad, and also for providing loans.

Besides, special fund should be allocated for the rehabilitation and employment generation of the Sidr affected people in the southern districts.

For the coastal areas funds should be allocated for the construction of more cyclone shelters for both human and livestock, especially in the char areas.

In the upcoming budget needs of the urban poor, char landers, disaster prone or monga prone people and low income groups should receive proper budgetary allocation.

Steps should be taken for rehabilitation for senior citizens and uprooted people.

Considering the prevailing inflationary situation in the country, allowance for senior citizens may be increased to Tk 300/person per month from the current Tk 220/person per month. The coverage under the programme should be increased up to 25 lakh from current 17 lakh.

On education, CPD proposed that scaling up of scholarships and incentives for disadvantaged girls and boys from very poor families would be a good initiative.

Government may consider tax waiver on educational expenses up to Tk 10,000 per annum.

For essential price stabilization, the CPD proposed to continue with zero-tariff on import of edible oils (crude and refined), lentils and essential food commodities including rice (proper monitoring to discourage over invoicing needed).

Adequate allocations will need to be made to cover the difference between procurement price and OMS price.

Higher allocation is needed for greater coverage and higher entitlement under various safety net programmes.