No cheer for low and middle income group in Budget 2022-23

There is no cheer for the low and middle-income group who are reeling under the onslaught of unprecedented increase of prices of essentials. The Budget for 2022-23 placed in Parliament keeps the tax free limit at Tk 300,000. This has remained unchanged for the past two years. If we consider annual inflation of 6% per annum, the amount should stand at Tk 337,000.

For the low and middle-income group, there is further bad news. The Budget has proposed a change in tax rebate for Investment Allowance. Currently Investment Allowance is calculated at 25% of taxable income. Tax rebate is given at the rate of 15% of Investment Allowance if taxable income is below Tk 15 lakhs; the rebate goes down to 10% if taxable income is above Tk 15 lakhs.

The proposed change envisages a reduction of Investment Allowance from 25% to 20% while tax rebate has been made uniform at 15%. This proposed change will increase the tax burden as follows:

Taxable income per month (Tk)???????????????Increase in tax

50,000???????????????????????????????????????????????????????????180%

60,000??????????????????????????????????????????????????????????? 49%

80,000??????????????????????????????????????????????????????????? 19%

100,000????????????????????????????????????????????????????????? 14%

125,000????????????????????????????????????????????????????????? 10%

Above 125,000???????????????????????????????????????????? 3% decrease

It is ironic that the higher income group is benefiting at the expense of the low and middle-income group. The low and middle-income category spend whatever is earned and hence any tax saving would have resulted in spending with favourable impact in GDP. On the other hand, for the high-income group, this savings will not lead to any increase in spending since they have large savings.