The government allowed investment of undisclosed money in stock market by paying a 10 per cent tax and slashed the proposed 1.5 per cent tax on export proceeds to 0.6-0.7 per cent, as the parliament on Tuesday passed the Finance Bill 2011.
The government also reduced proposed tax at source on registration of commercial flats and spaces, withdrew tax on poultry sector, cut tax on tobacco companies and rationalised rates of premium on different types of saving certificates.
Parliament passed the Finance Bill 2011, placed by finance minister AMA Muhith, amid boycott of the current session by the main opposition.
Before Muhith placed the bill, prime minister Sheikh Hasina in her budget speech asked him to consider allowing undisclosed money in the stock market and reducing export tax at source to 0.6 per cent for garment sector and 0.7 per cent for other sectors from 1.5 per cent proposed in the budget for 2011-2012.
She also requested the finance minister to restore the provision for giving 10 per cent rebate on investment of taxed money in the capital market.
Muhith said that he did not have much to say after the prime minister's deliberation on the issues.
'Given the volatility in the stock market,' Muhith agreed, 'it needs more incentives from the government.'
Admitting that such incentives were a bit unethical, he said that the facility for legalising undisclosed money did not bring much benefit in the past. 'In 2009-2010 at total of Tk
922 crore was legalised and only Tk 121 crore was realised as income tax,' he said adding that the best way to reduce the size of undisclosed money was to invest it in real economy.
The finance minister in his proposed budget placed in the house on June 9 allowed legalisation of undisclosed money by investing it in government treasury bonds and infrastructure development fund by paying a 10 per cent tax ignoring calls from stock market stakeholders to allow such provision in the market.
Muhith said he had proposed in his budget for 2011-12 for allowing legalisation of undisclosed money in two sectors with an aim to bring the undisclosed income, size of which ranges between 42 and 82 per cent of the country's gross domestic product, into real economy.
Hasina told the house on Tuesday that share prices were overvalued towards the end of last year which caused a slide in the market.
She alleged that most of the brokerage houses were run by BNP men. 'They also played a role from behind the scenes.'
She said that the government had taken steps to float shares of the state-owned enterprises in the market and hoped that some SOEs and non-government shares would be off-loaded in the market in two months.
About the share market inquiry committee, she said that the committee had made observations on surface level.
She asked the minister concerned to launch a thorough investigation in the matter and punish the real culprits.
Muhith also agreed to reduce the export tax at source on export proceeds as the leaders of different trade and business bodies requested the government to cut the proposed increase in tax at source saying that such increase was not private investment-friendly and would hamper exports.
The minister said despite a robust export growth of 40 per cent in the outgoing fiscal, the export-oriented entrepreneurs were at risk due to external factors like price hike of raw materials on international market.
The finance minister extended the facility of tax holiday for poultry industries until 2013.
He earlier proposed a five per cent tax on the sector and withdrew tax holiday facility.
He, however, kept the sector out of tax net as it was creating employment and meeting the demand for protein diet.
Muhith also announced reduction of income tax at source for registration of commercial flats and spaces to almost one third of the amount originally proposed.
He said tax rate would be Tk 8,000 per square metre from the proposed 20,000 for flats and spaces at Gulshan, Banani, Baridhara, Motijheel and Dilkusha.
It will be Tk 6,000 from the previous Tk 15,000 for areas like Dhanmondi, Basundhara, Mahakhali and Karwan Bazar in Dhaka and Khulshi and Agrabad in Chittagong.
For other areas the rate will be Tk 2,000 from previous Tk 5,000.
As for tobacco manufacturing companies, Muhith announced a 42.5 per cent income tax cut from the originally proposed 45 per cent for non-listed companies in share market. For listed tobacco companies, he imposed income tax at a rate of 35 per cent.
The finance minister announced that duties would be withdrawn to make gas cylinders cheaper.
He also announced measures to remove discrepancies in the rates of interest on savings certificates.
Muhith said duty on luxurious double cabin pick-ups and supplementary duty on 1001cc to 1500cc vehicles would be reduced to 30 per cent from the proposed 45 per cent.
The minister will place in parliament for passage today the Tk 1,63,589 crore budget for the 2011-2012 financial year with a huge deficit of Tk 45,204 crore or 5 per cent of the gross domestic product.
Muhith ruled out crisis in budget financing. 'It has been well described in the budget proposals from which channel the money will come.'
He said revenue earning had witnessed a 27 per cent growth in the current fiscal and hoped that the revenue earning would reach the target or could even exceed it in the next fiscal.
The proposed budget, which is likely to be passed today, projects a deficit of Tk 45,204 crore or 5 per cent of the gross domestic product estimated at Tk 8,99,670 crore in the 2011–12 financial year.
The government has a target to borrow Tk 13,058 crore from foreign sources and Tk 27,208 crore from local ones to meet the budget deficit.
Muhith expressed hopes to bring down inflation to 7.5 per cent in the next financial year from 10.7 per cent recorded in April.
Muhith aimed at gathering revenue which is 24.37 per cent higher than the targeted revenue collection in the revised budget of the current financial year. He also set a target of achieving a 7 per cent GDP growth, compared with the 6.7 per cent growth target in the current financial year.
Of the total budget outlay, the government proposed to spend Tk 1,02,903 crore on non-development sector, including Tk 16,519 crore to repay internal debts and Tk 1,478 crore to pay back foreign loans, and Tk 50,642 crore on development activities.
The proposed budget projects a revenue earning of Tk 1,18,385 crore, or 13.2 per cent of the GDP, comprising Tk 91,870 crore collected by the National Board of Revenue in taxes and duties, non-NBR tax revenue of Tk 3,915 crore, and Tk 22,600 crore non-tax revenue.
The third budget proposed by the Awami League-led government after the 2008 general elections, however, attaches high priority to human resources development, education, transport, infrastructure, social safety net, power and energy, and agriculture sectors.
Source : New Age
