Need to rationalize personal tax exemption limit

The tax exemption limit for general taxpayers remains at the same level of Tk 250,000 for the last three years, the last change being in the Finance Act 2015. The lowest tax bracket also remains at 10%. The Finance Minister has shown a correlation between per capita GDP and tax free limit to justify the limit remaining unchanged. To my mind, this is an apple and orange comparison. The per capita GDP is derived from the income of the entire population including more than 91% of the population who are either not required to pay tax or are evading tax.

The reality is that inflation has hovered in the range of 6 to 7% in the past three years. Using a compounded rate of 6%, the tax exemption limit should have increased by 20% to BDT 300,000.

If we look around in the neighbouring countries to understand the tax free limits and the lowest rate of tax, we see a different picture. In India, the tax free limit is INR 250,000 which at current rate of exchange stands at BDT 325,000 with the starting tax rate of 5%. In Pakistan, the tax free limit is 400,000 Pakistan Rupee (equivalent BDT 310,000) and a starting tax rate of 2%. In Thailand, the tax free limit is 150,000 Thai Bhat (equivalent BDT 355,000) and a starting tax rate of 5%. If we turn our heads towards the west to a developed economy such as UK, the tax free rate is 11,500 British Pound (equivalent BDT 12,00,000).

Unfortunately, logic and reasoning takes a back seat when less than 10% of the population pays tax and NBR is faced with the arduous task of increasing revenue by more than 30% when GDP increase is in the range of 7%.

The low and middle income population are already at their wits end on how to make both ends meet faced with this relentless inflation. Income levels are rising at a much lower levels in all fronts faced with sluggish private sector growth, the malaise in the capital market and the low rates of bank interest. Let us hope that rising taxes do not pose to be "the last straw that broke the camel's back" and better sense will prevail with the authorities.