Amid widespread criticism, the Jatiya Sangsad on Wednesday passed the finance bill with some changes retaining only one of the three proposed offshore amnesty tax facilities, allowing the repatriation of any undisclosed assets by paying a tax of 7 %, while removing options to keep wealth offshore by paying minimum tax.
Under the approved amendments, if an individual taxpayer’s offshore assets are not disclosed and later discovered, the government could impose a fine equivalent to the value of the concealed assets.
In such a case, all local assets of the affected taxpayer could also be confiscated and auctioned off by the government.
The finance bill, which gives effect to the new taxation, has also relaxed the conditions for benefiting from the 2.5% corporate tax reduction facility.
At the same time, the condition of presentation of return documents for companies and businesses has been relaxed. However, this will not apply to individuals.
In addition, no sanction can be imposed in the event of non-declaration without having given a reasonable opportunity to be heard.
According to the Finance Bill 2022 which was passed yesterday, to benefit from the Offshore Tax Facility, Bangladeshis can repatriate cash, bank deposits, banknotes, bank accounts, convertible securities and financial instruments in paying a tax of 7%.
Tax amnesty will allow owners of these assets and cash to comply with tax rules and avoid fines, penalties and criminal prosecution.
The law stated: “The provisions of this section do not apply to cases where proceedings have been instituted for tax evasion or criminal activities under any provision of this order or any other law by June 30 2022.”
In the budget for the financial year 2022-23 tabled on June 9, Finance Minister AHM Mustafa Kamal had proposed to allow Bangladeshi citizens to legalize all movable assets including cash, bank accounts, securities and financial instruments without repatriation to Bangladesh by paying a 10% tax. .
The budget proposal also provided that holders of undisclosed assets would be allowed to show any of their real estate assets outside of Bangladesh in tax returns by paying a 15% tax. This proposal was also not included in the final budget for FY23.
While the proposal was immediately criticized by economists and professionals on moral grounds, the finance minister at the post-budget press conference defended the move, saying it would give money launderers the ability to bringing their undeclared offshore assets home and adding them to the mainstream economy.
Companies get a reprieve
The amended Finance Act 2022 relaxed the total number of cash transactions a company can make in a year from the proposed Tk12 lakh to Tk36 lakh to obtain a 2.5% corporate tax reduction. From this Tk36 lakh, the government has also added a limit of Tk5 lakh on a single transaction.
At the same time, all transactions above Tk 36 lakh must be done through banking channels, called traceable channels in the proposed budget.
This will be applicable for listed companies, unlisted companies and UCIs (sole proprietorships).
If companies do not comply with the above cash transaction limitations, the tax rate for listed companies will be 22.5%, unlisted companies 30% and UCIs 25%.
Listed companies will also have to shed more than 10% of their shares as proposed in the budget.
In the final budget, corporations and businesses no longer have to provide proof of submitting tax returns, but can instead provide a system-generated certificate containing the taxpayer’s name and identification number ( TIN) in the year they are incorporated, registered or formed and the the following year. But the proof of tax declaration will become obligatory thereafter.
In the proposed budget, the Deputy Commissioner of Taxes could institute a fine not exceeding Tk 10 lakh for any violation of a tax rule, but the final budget states that no penalty can be imposed without giving a possibility reasonable for any offender to be heard.
Finance Minister AHM Mustafa Kamal said he accepted 17 recommendations put forward by MPs but could not accept 86 others.
Expressing regret over the matter, he said uncertain economic conditions made it difficult to fully assess these proposals.
Meditate in peace, once again
The proposed budget had considered imposing a 15% value-added tax (VAT) on meditation services and removing its exempt status, but in the final budget it kept the VAT at 5%.
Additionally, there was a request to remove the 5% VAT at each level of the cellphone supply chain, but the final budget made no changes to that end.
The VAT on imported lifts in the final budget has been revised downwards to 15%, including customs duties, instead of the proposed 31%. Previously, it was 11%.
A 15% VAT was reintroduced at the bitumen import stage, with the decision taken to benefit local bitumen producers.