Imposition of 27.5 per cent tax in employee welfare funds like provident and gratuity funds of private sector in the new income tax act has raised eyebrows. Usually the money of provident funds and gratuity of employees are invested in profitable sectors such as Fixed Deposit Receipt (FDR) and saving certificate. Since 2016, a tax of 5 to 10 per cent has been paid on profits of these funds depending on the type of investment. The new income tax law imposes a tax of at least 27.5 percent on the income.
On the contrary, there is no tax on income of provident funds and gratuity funds of government employees. The government pays 13 per cent interest on provident fund of government employees. This is the highest interest on deposits. Such discriminatory policy between government and private sector employees would remain a bad example. The financial security in private job is already less compared to government job. Such discriminatory policy would further widen the gulf. It can be noted that all private sector employees do not enjoy provident fund facility but all government employees enjoy pension.
Meanwhile private sector employers provide the full amount of gratuity fund. Added tax in the income would not only make the employees suffer, it would add burden to the employers also. FBCCI’s executive director TIM Nurul Kabir thinks the provident funds work as a social safety of employees after they retire. They will be in tight spot due to increase in tax. Center for Policy Dialogue’s senior research fellow Taufiqul Islam told Prothom Alo that private sector employees already have less social safety. The discrimination would increase further due to slapping of tax.
Private sector employees get some money deducted from their own income and same amount provided by their employers and the interest on the savings. Increasing tax on that income can only mean discouraging such funds. The government is paying highest 13 per cent interest on the pension money of the government employees while on the other hand imposing more tax on the provident fund of private sector employees. This indicates a discriminatory policy of the government towards the private sector employees.
Nobody is denying the necessity of government’s increase of revenue. But why should the private sector employees share the burden? The government should increase the tax jurisdiction. We do not see any effective measure being taken to bring those not yet under tax coverage. The government condones tax evasion worth billions by wealthy people but cut the income of private sector employees. This is not only illogical but also unjust. Although the issue of tax law reform has long been discussed, we do not see any effective measure over it from the government.
We demand withdrawal of increased tax on the provident fund of the private sector employees. Take action against those who are evading tax worth billions every year. It would not be just to make the already fragile future security of the private sector employees more vulnerable.