In an attempt to make taxation more equitable, the government is going to levy more tax on the wealth of the super rich in the country.
After the forthcoming national budget, individuals having net personal wealth worth over Tk50 crore will have to pay a 35% surcharge on assets, up from the current 30%.
The government will also raise the minimum surcharge threshold, offering some relief to comparatively less wealthy individuals having assets worth up to Tk10 crore.
On the other hand, the surcharge-free limit of assets will remain unchanged at Tk3 crore.
Currently, the maximum surcharge rate is 30% on net asset worth over Tk20 crore, according to senior officials of the finance ministry.
Taxpayers have to declare the facts if they have more than one car or residential property with an aggregate area of 8,000 square feet in the city corporation areas.
These categories of taxpayers have to pay a 10% wealth surcharge if their asset value is above Tk3 crore but less than Tk5 crore.
Explaining the reason behind expanding the minimum surcharge threshold, the finance ministry officials said the decision is aimed at following a progressive tax system.
As a result of this, people will be encouraged to disclose their wealth and assets instead of hiding those, they added.
Wealth surcharge is applicable to the payable amount of income tax at a prescribed rate of the tax authorities.
Surcharge is a type of duty that is levied on the deed value of the individual's assets.
Economists and business leaders, however, are of the opinion that the total surcharge system needs to be restructured. Besides, expanding the tax net is very important to give relief to the taxpayers, they feel.
Speaking to The Business Standard Dr Ahsan H Mansur, executive director of the Policy Research Institute (PRI), pointed out some shortcomings of the existing surcharge system.
"First, the surcharge is now levied on the value of land mentioned in the registration deed that always mismatches with the current price"
Further explaining this he said, "Suppose, a person bought one bigha of land at a low price in Gulshan in 1960 and built a 10-storey apartment there. As the surcharge is levied on the price of property mentioned in the deed, this person will be out of the tax net.
"On the other hand, another individual who has bought a flat in the same area for Tk3 crore has to pay the surcharge."
Such limitations of the surcharge system contribute to social inequalities, he observed.
He also mentioned that currently surcharges are levied on income, which is not logical. The surcharge should be levied on the current value of the assets, he added.
The PRI executive director further added that the National Board of Revenue needs to determine the value of assets. For this, the revenue board may consider opening a separate office under the Income Tax Department, he suggested.
Abul Kasem Khan, chairman of Business Initiative Leading Development (BUILD), said that wealthy people having to pay higher taxes is a common practice across the globe.
Introducing a new slab with a 35% surcharge will be helpful to realize more tax during the pandemic period, he added.
"Tax officials should make sure that no one can evade tax. Gradually, everyone who has a taxable income must be brought under the tax net," said Abul Kasem Khan, also a former president of the Dhaka Chamber of Commerce and Industry.
Echoing Ahsan H Mansur, he said the surcharge should be imposed on the real value of assets.
"Many people have a tendency to hide assets to stay out of the tax net."
Besides, some people have a tendency to register their assets, house and cars in others' names or in their companies' names, which is logical."
Abul Kasem Khan, also a director of AK Khan & Co Ltd, further said that the surcharge rate should be rationalised after the pandemic, otherwise it will make a burden on high taxpayers.
Like Kasem Khan, DCCI President Rizwan Rahman welcomed the government's decision to raise the surcharge rate on the very rich. "It is a good initiative for realising more tax amid the pandemic, but in the long run, it should be revised, otherwise, it will create more burden on large taxpayers."
He also suggested expanding the threshold of surcharge-free limit of asset value up to Tk5 crore instead of Tk3 crore.
In 1963, wealth tax was introduced by the Pakistan government for the first time. After independence, the Bangladesh government continued that tax.
In 1986, the government added section 16A to the Income Tax Ordinance through the Finance Act to make the surcharge permanent.
In the 1996-97 fiscal year, it was withdrawn in the face of pressures from various groups, but it was later reintroduced in FY2011-12.