Higher penalty for noncompliance

Corporate taxpayers will have to pay more in fine from the next fiscal year for noncompliance, which includes non-submission of return on withholding tax and a statement on employees’ filing, according to a proposal of the National Board of Revenue. The tax authority is seeking to raise the fine by 10 times to Tk 5,000, or 10 percent of the tax imposed on last assessed income if a company, cooperative or NGO does not submit the return of withholding tax and statement or provide information. The fine has also been hiked four times to Tk 1,000 per month for the delay in compliance, according to the proposal by the NBR.

Until the outgoing fiscal year, companies face penalty of Tk 500 for noncompliance regarding the statement on payment of salary, issuance of certificate on tax deduction and information on payment of interest and dividend.

In case of the continuation of default, the amount of fine was Tk 250 per month. “We have sought to increase the penalty for noncompliance as the existing penalty is not creating any bite. Companies are not taking the issue of compliance seriously because of the low fine amount,” said a senior tax official yesterday.

The penalty was introduced in 1984 and since then the rate has not changed, he said.

An analyst, however, said the increase in fine will not be instrumental in raising tax collection unless the system is automated.  The tax authority’s move to hike the penalty and expand the coverage of the fine came after it found that only 5 percent companies submit returns on withholding tax, which accounted for 62 percent of the total income tax collected in 2015-16. Tax officials said the collection of withholding tax would be higher if compliance is ensured.

“We have found that there are companies and agencies that don’t collect withholding tax at all,” said the senior tax official. “Some of them collect withholding tax but don’t deposit it to the exchequer, while some deposit less than the amount collected.” He said there are companies that issue fake certificates on withholding tax deduction without deducting the tax.

Until now, the penalty for the non-submission of withholding tax return has not been clearly spelt in the rules. The NBR has proposed to slap the fine in the Finance Bill 2018 in order to combat tax evasion and increase collection.

“We are not increasing corporate tax rates. Instead, we are reducing the rates gradually. So, the withholding tax is going to be a thrust area to increase revenue collection,” said the NBR official. He said the tax authority has taken some measures to boost source tax collection and is receiving good result.

From 2018-19, a taxpayer’s file will face audit if they don’t submit withholding tax return and furnish statements or returns on salaries and allowances of their employees, according to the budget speech of Finance Minister AMA Muhith on June 7. Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said the increase in the fine is logical.

“But it would also increase harassment for taxpayers unless an automated system is put in place to facilitate submission of documents,” he said. Mansur said in absence of automation, the new provision will increase the piling of papers at tax offices and tax officials are unlikely to examine all of the documents. So, taxpayers will have to bribe field officials to obtain a receipt of document submission. As a result, compliance will increase the cost of doing business, he said.

The former economist of the International Monetary Fund also touched upon the requirement for companies to furnish statement on their employees return filing. He said various countries have rules where employers give one wage declaration form to employees and one to revenue authorities. After that it becomes the duty of tax collectors to see if all the employees have submitted returns. If anyone ignores, the revenue administration can go after the individual, he said.

Zina Tasreen

AIIB bullish on Bangladesh

Bangladesh is progressively becoming one of the more important countries for the Asian Infrastructure Investment Bank, with the China-led multilateral lender looking to bankroll energy and transport projects in the country. “We are very bullish on Bangladesh,” Dong-ik Lee, director general of investment operations of the AIIB, told The Daily Star in a brief interview yesterday on the eve of the multilateral lender’s third annual conference. It is one of the fastest growing economies in the world, the political situation has stabilised and the macroeconomic growth is good, he said.

The country is of particular interest to the AIIB as it is at an inflection point of social and economic development; a helping hand in ramping up its infrastructure would allow Bangladesh to comfortably set sail for the next stage. And addressing infrastructure funding gap in a “lean, clean and green” way to enable sustainable economic development in the Asia region is the newest multilateral lender’s modus operandi.

Since the AIIB does not lend on concessionary terms, its significance to Bangladesh is expected to grow once the country enters the competitive lending market with its recent admission to the middle-income bracket. “That’s a very good sign — you’re moving in the right direction. You have changed the way outsiders look at Bangladesh.” Since it began operations in January 2016, the AIIB has piped in a total of $285 million on three projects in Bangladesh.

The first project it approved for the country was the construction of a greenfield 220-megawatt dual fuel power plant in Bhola. The AIIB will provide $60 million for the project. Dong-ik is particularly satisfied with its progress, terming it as one of the successful projects for the AIIB. Construction work has already begun and combined cycle commercial operation is expected to begin by December next year. Another $60 million is going towards improving the efficiency in gas production in Titas Gas Field and expanding gas transmission pipeline capacity between Chittagong and Bakhrabad.

The AIIB also approved a loan of $165 million to enhance power distribution capacity and increase the number of rural and urban electricity consumers in Bangladesh. Upon completion, the project is expected to benefit about 12.5 million people in rural areas. Next to get the financing green light from the AIIB board would be a $270 million-project to increase access to safe water supply and sanitation services to selected pourashavas and to strengthen the pourashavas’ institutional capabilities for delivering improved water supply and sanitation services.

Of the total project cost, the AIIB will provide $130 million, the World Bank $130 million and the government the remaining $10 million. The AIIB though has no upper limit to what it wants to pump into Bangladesh. At present, the AIIB’s biggest borrower is India, which has taken $1.2 billion thus far. “So, there is ample room for Bangladesh. There are many good opportunities for us there and there are no downside risks,” Dong-ik added.

As many as eight projects have been submitted to the AIIB for consideration, said Economic Relations Division Secretary Kazi Shofiqul Azam, who is leading the Bangladesh delegation in the three-day conference. “AIIB is not an alternative to the World Bank, the Asian Development Bank and the other bilateral donors. It fills in the gap in financing needs,” said Azam, who will be discussing the merits of the projects with the AIIB top brass at the Indian financial capital. At the three-day conference, finance ministers or the next high ranking officials of the AIIB’s 86 member countries will be involved in taking decisions that affect the bank over the next couple of years, said Sir Danny Alexander, its vice president and corporate secretary, in a press briefing yesterday to announce the start of the event.

India was chosen as the venue for the third annual meeting of the Beijing-based multilateral development bank as it is the second largest contributor of capital (8.72 percent) and the largest recipient of its financing — and was an active participant in the founding of the AIIB, he said. The previous annual meeting was held in South Korea, and the first one was in Beijing.

Often accused of being an arm of Chinese government policy, especially Chinese President Xi Jinping’s Belt and Road Initiative, due to China’s disproportionate share in the bank (31.02 percent) as opposed to other members, Sir Danny dismissed the charges once and for all. “It is an international institution, it is a multilateral development bank. It is the bank of all the member countries. It is as much an Indian bank as it is a Chinese bank or a British bank.” It operates based on rules and no project will get financing from the AIIB unless it meets all the parameters agreed by the member countries and discussed by the board of government, he added.

“AIIB might be as Chinese a bank as the World Bank is American,” said India’s Economic Affairs Secretary Subhash Chandra Garg. No project has so far been funded on the Belt and Road Initiative by the AIIB, he added. In the two-and-a-half years in which the bank has been in operation, it has lent out $4.4 billion to 25 projects in the Indian subcontinent, Myanmar, China, Oman, Philippines, Indonesia, Egypt, Tajikistan, Georgia and Azerbaijan.

The bank started out with 57 members, including France, Italy, Germany and the UK. Of the Group of Seven countries, only Japan and the US are not members.

Its capital base stands at $100 billion, with 20 percent assigned to paid-up capital.

Trump Kim summit: US and North Korean leaders hold historic talks

Donald Trump and Kim Jong-un have become the first sitting US president and North Korean leader to meet, an unprecedented development after a year of exchanging threats.

The pair shook hands at a luxury hotel on Singapore’s Sentosa island before proceeding to talks.

After the summit the leaders signed a “comprehensive” document, promising a new relationship between the nations.

They had been discussing defusing tensions and nuclear disarmament.

The document commits North Korea to work towards “the complete denuclearisation of the Korean peninsula” and promises “new relations” between Washington and Pyongyang.

The US had demanded “complete, verifiable and irreversible denuclearisation”.

• LIVE: Follow the latest summit updates
• Handshake moment explained in pictures
• Diplomacy on a plate: What did they eat?
• Trump-Kim summit explained

There was also a commitment to build “a stable and lasting peace” on the Korean peninsula.

“I think both sides will be very impressed with the result,” Mr Trump said at a signing ceremony with Mr Kim.

The US president said more details would be provided at a press conference due shortly.

Mr Trump spoke of a “special bond” with the North Korean leader and said he was “absolutely” willing to invite him to the White House.

“We’ve decided to leave the past behind,” Mr Kim said. “The world will see major changes.”

Still, analysts remain divided on what the summit will ultimately achieve. Some see it as a propaganda win for Mr Kim, others a potential path to peace.

Details are thin – but it’s a start

Analysis: Laura Bicker, BBC News, Singapore

The agreement the two sides have signed is vague and lacking in detail. It only commits the US and North Korea to the denuclearisation of the Korean peninsula.

There is no mention that the process should be verifiable or irreversible – which is what the US has been pushing for. There is no timetable to disarm North Korea nor is there any invitation for weapons inspectors to be allowed in.

The US has said it will provide security guarantees without specifying what that might mean – or if that could involve the removal of some American troops based in South Korea. The two sides have promised to hold follow up talks and work on efforts to build a lasting peace regime.

This could eventually result in a treaty to end the near 70-year war. It is at least a start. Something to build on.

How the historic moment unfolded

The summit began with a striking image, unimaginable just months ago.

The two men walked towards each other and firmly gripped each other’s hands in front of US and North Korean flags.

Mr Trump patted Mr Kim’s arm as they stood on red carpet and exchanged a few words before turning to face the gathered press.

“I feel really great. We’re going to have a great discussion and will be tremendously successful,” the US president said. Sitting alongside each other, ahead of a one-on-one meeting, the pair appeared relaxed against the odds.

“It was not easy to get here,” Mr Kim said. “There were obstacles but we overcame them to be here,” and his counterpart responded “That’s true.”

• North Korean crisis in 300 words
• ‘Stop romanticising a dictator’
• Singapore’s taxi drivers on the summit

The two men, accompanied only by interpreters, spoke for a little under 40 minutes. They were then joined by small delegations of advisors for a working lunch.

From Washington the group included US Secretary of State Mike Pompeo and security adviser John Bolton, and on Pyongyang’s side, Mr Kim’s “right-hand man” and former spy chief Kim Yong-chol, and foreign minister Ri Yong-ho.

Over lunch they shared a mix of Western and Korean dishes, including stuffed cucumbers and Daegu jorim, a soy-braised fish dish.

What does this mean for each man?

The unprecedented event carries great potential prestige for each leader – but also, in the long run, a possibly catastrophic loss of face.

For the moment Mr Trump will credit any successful outcome of talks to his “maximum pressure” campaign on North Korea, that tightened economic sanctions and threatened military action. Many believe that no matter what is achieved this will be the narrative. For Mr Kim, securing a stage with the US leader is seen as a victory in itself, something which neither his father or grandfather could achieve. Such a meeting has long been seen as a prize in the eyes of North Korea for the legitimacy it would confer on its leader.

Kim’s journey from outcast to statesman

For decades, North Korea has been a pariah state, and now its latest hereditary leader is being treated as a world statesman. Last year, it would have been a rare sight to see a North Korean flag flying anywhere in Asia. Now, Mr Kim – who runs a totalitarian regime with extreme censorship and forced-labour camps – is meeting and greeting dignitaries.

• Kim: The new kid on the diplomatic block
• North Korea’s sidelined human rights crisis

On the eve of the summit, Mr Kim toured Singapore’s tourist sites, waving to excited crowds and snapped a selfie with the city state’s foreign minister. Tuesday’s front page of North Korea’s official newspaper featured the extraordinary scenes on display in Singapore, offering many in the country an unprecedented glimpse of their leader in a setting utterly at odds with their daily life.

How did we get here?

This is an outcome that seemed unimaginable less than a year ago – when Mr Trump and Mr Kim exchanged streams of fiery insults – and North Korea conducted several ballistic missile tests in defiance of the international community.

• Who’s pulling the strings of the N Korea breakthrough?
• Who are Kim’s running bodyguards?
• How well has Trump prepared for Singapore?

Mr Trump famously vowed to unleash “fire and fury” if Pyongyang kept threatening the US. Meanwhile, Mr Kim has called Mr Trump “mentally deranged” and a “dotard”.

But earlier this year North Korea showed a new openness to diplomacy and held direct talks with Seoul. The rapid improvement in relations between the North and South Korea – technically still at war – culminated with a historic leaders’ summit in April.

Mahathir calls for review of tpp trade pact