Employees of five state-owned banks have alleged that the National Board of Revenue (NBR) is imposing income taxes on all their allowances and benefits without recognising their status as government employees.
According to them, all allowances and benefits for government employees, excluding basic salary, festival allowances, and bonuses, are eligible for income tax exemption, but the NBR is not following this.
Officials from the state-owned banks Sonali, Janata, Agrani, Rupali, and Bangladesh Development Bank have urged the NBR to cease its imposition of additional income taxes on around 40,000 bank employees.
They claim that they have been receiving NBR notices for additional income taxes since 2018 and have been actively opposing the matter ever since.
Showing NBR income tax notices issued against him, a deputy general manager-level official of Janata Bank told The Business Standard, "Janata Bank is fully government-owned, and its employees are considered government employees. However, the NBR has issued notices imposing taxes on all forms of income, categorising the bank as a private institution."
He said despite multiple meetings held between the management committees of the state-owned banks and the NBR in this regard, no resolution has been reached.
According to sources, the NBR has been sending notices for additional income tax to the employees of these banks based on the Pay Scale 2015 notification issued by the Ministry of Finance. The names of Sonali, Janata, Agrani, Rupali, and Bangladesh Development Bank were not included in this notification.
During that period, separate notifications for pay scales were released for civil administration, autonomous and state-owned institutions, as well as banks, insurance companies, and financial institutions, police, Border Guard Bangladesh, and the judiciary. These banks were not listed under the category of banks, insurance, and financial institutions in the notification.
However, bank officials said a conclusive clarification letter issued by the Finance Department of Ministry of Finance on 22 February 2023, stipulated that the pay scale,2015 should be applicable to the employees of these five banks, with the exception of the chief executive officers and managing directors, until these banks establish their own pay scales.
According to the clarification letter that upholds the essence of SRO 370-Law/2015 dated 15.12.2015 of this ministry which read as "Service (Autonomous(Public Bodies) & State Owned Enterprises) (Salary & Allowance) Order,2015 " officials of these banks are already recognised as Government Employee and shall get tax benefit according to SRO No. 211-Law/Income Tax/2017 being repealed by SRO NO.225-Law/Income Tax/2023 dated 13.07.2023 of NBR.
Bank sources also said their authority had approached the Finance Ministry regarding this matter and the ministry as well instructed the NBR through IRD, the supervising department of NBR, to recognize these 5 bank's employees as govt. employees and settle the tax issues accordingly but the NBR still insist on their unreasonable stand.
"The finance ministry has clarified that there is no requirement to categorise these banks under the bank-insurance sector in the pay scale. They are entitled to enjoy the same benefits as autonomous institutions. However, it remains a significant question why the NBR has not addressed this matter accordingly."
Several NBR officials on condition of anonymity said that the decision to issue notices demanding additional income tax from these bank officials came from the NBR's head office, rather than being a decision made at the field level.
Md Mohidul Islam Chowdhury, second secretary (tax law) at the National Board of Revenue, said, "The tax collection notices have been issued based on the National Pay Scale 2015 provisions. The recent directives from the Finance Ministry are not conclusive on this matter. Their names should be included in the pay-scale."
Bank officials say if income tax is imposed on their entire income, senior principal officers will face an additional annual income tax burden ranging from Tk30,000 to Tk80,000.
Meanwhile, officers holding positions from assistant general manager to deputy managing director would be required to pay an additional income tax ranging from Tk150,000 to Tk250,000. In the current circumstances, nobody is prepared to shoulder such a substantial increase in their tax liability, they said.