Blessing the rich: Surcharge-free limit of wealth raised to Tk4cr

The surcharge-free limit of wealth has been raised from Tk3 crore to Tk4 crore in the latest budget for FY2023-24.

Finance Minister AHM Mustafa Kamal made the announcement while placing in the Jatiya Sangsad (JS) a Tk7.61 lakh crore national budget for the next fiscal on Thursday (1 June).

The measure, however, has not been well-received.

Economists and experts said the government should revise the surcharge calculation method in a way that wealthy people have to pay more tax in the current economic situation, but the new measure will reduce it.

As per Kamal's budget speech, "Surcharge is collected from wealthy individual taxpayers in Bangladesh at certain rates based on their income tax. This provision of surcharge has been in force for the last few years. The surcharge of individual taxpayers ensures a balanced distribution of income and wealth along with the economic development of society.

"In case of levy surcharge, on the basis of individual taxpayers' disclosed net wealth value to simplify enforcement of surcharge levy and reduce the burden of the middle-class taxpayers, I propose to raise the limit of surcharge from Tk3 crore to Tk4 crore. I propose a minimum surcharge amounting to 10%, where the net wealth of an individual exceeds Tk4 crore and 35% surcharge for individuals who have net wealth exceeding Tk100 crore."

Currently, there is a 10% surcharge on assets worth between Tk3 crore-Tk10 crore, or if they have more than one car, or own over 8,000 square feet of real estate in the city area.

The surcharge rate is 20% for those whose assets are worth from Tk10 crore to Tk20 crore, and 30% for those with assets worth from Tk20 crore to Tk50 crore. 

Taxpayers with assets exceeding Tk50 crore have to pay a 35% surcharge, according to the NBR.

Policy Research Institute (PRI) Executive Director Dr Ahsan H Mansur told TBS the latest government measure will reduce the number of taxpayers in the country.

According to the National Board of Revenue, around 15,000 taxpayers paid a surcharge amounting to Tk600 crore in FY21.

Dr Ahsan H Mansur said surcharge should be calculated based on asset value, not income. If any wealthy individual has no income in a year, he may stay out of the surcharge which is justified.

The economist also said the asset valuation should be based on the current market price of assets. For example, if someone bought a house in the Gulshan area 40 years ago, he pays tax on its market value at that time, which is not justifiable. They should pay tax on an estimated current price.

If the government would value assets as per the current market situation that will be helpful to realise more revenue, he added.

NBR officials also acknowledged that the number of wealthy people in the country is low due to the evaluation methods which allow valuing assets at purchase price, not at market rates.

"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 The Business Standard earlier.

Such an additional tax existed even before the country's independence, he said, adding 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.