Black Money Whitening: No scope to invest in land

Parliament yesterday passed the tax measures for fiscal 2019-20, scrapping the opportunity to invest black money to buy land.

This scope was proposed in the Finance Bill 2019, placed in parliament on June 13.

However, the scope for investing black money in construction, in special economic zones, Hi-Tech parks as well as for buying residential buildings or apartments will remain as proposed.

The House also reduced tax on retained earnings and reserves of companies to 10 percent from initially-proposed 15 percent in the face of outcry from businesses, who argued that the step would discourage business expansion and investment.

Lawmakers also passed the proposal to cut tax on stock dividend to 10 percent, a move taken to bolster confidence of small investors.

Usually, the finance minister places proposals for changes in tax measures after the prime minister tables her recommendations. This year, although Finance Minister AHM Mustafa Kamal was present in parliament, he did not say a word about the changes.

The finance ministry also did not share any written brief about the changes with journalists, a break from the tradition. It did not brief the media either.

In her speech, Sheikh Hasina said the government initially proposed to impose 15 percent tax on stock dividend to encourage listed companies to pay cash dividend to protect interest of small investors.

Some businesses objected to this, she said.

“We also have to consider interest of small investors apart from the concerns of big businesses and entrepreneurs.  Investors also expect dividend by investing in the capital market,” she said, placing proposals for changes in the budget.

Listed companies will have to pay cash dividend equal to the ratio of stock

dividend. If the ratio of stock dividend is higher than the cash dividend, the company will have to pay 10 percent tax on stock dividend.

The House also passed the proposal that listed companies would give 30 percent of its net profit as stock and cash dividend. If any company fails to do so, it will have to pay 10 percent tax on retained earnings and reserves.

In the budget proposal, the government sought to slap 15 percent tax on the retained earnings and reserves of a company if the amount exceeds 50 percent of the paid-up capital. It also said stock dividend by listed companies will be subject to 15 percent tax.

Parliament also passed proposal to impose specific tax at Tk 4 for each kilogram of yarns used by weavers instead of previously proposed 5 percent VAT.

It also approved the proposal to rationalise import duty on papers that are not produced by domestic mills

Placing the proposed changes, Hasina said Bangladesh was advancing to attain the Sustainable Development Goals by 2030 and to become a developed country by 2041.

“This budget will take us forward. Bangladesh is advancing and will advance,” she said.

The finance minister did not propose any changes but said the budget was prepared in a way that its impact would reach as far as 2041. “We have included such areas that they will give benefit for a long time.”

Kamal was also upbeat about accelerated GDP growth.

“Our GDP growth will of course be double digit by 2024,” he said, expecting that the economy would grow by 10 percent annually from 2024 to 2030 and onward.

Bangladesh will not borrow from anywhere by that time, said Kamal, who placed his maiden budget this year.

 “We have a debt-GDP ratio less than 34 percent and we borrow from China …. By 2030, we will not borrow any more. We will lend,” he said.  

In his speech in the House, Kamal said he was yet to recover from illness. He could not also place the budget proposal because of fever.

So for the first time in the history of the country, the PM had to place both the budget as well as the changes in the budget measures.