ICSB Journal (April-June 2018) by ICSB Bangladesh

Volume : XX

Issue : 2

April - June 2018

OBSERVATIONS ON THE

BUDGET 2018-19

AND DRAFT COMPANIES ACT

INSTITUTE OF CHARTERED SECRETARIES OF BANGLADESH (ICSB)

Institute of Chartered Secretaries of Bangladesh (ICSB) was established under an Act of Parliament i.e. Chartered Secretaries Act 2010 is the only recognized professional body in Bangladesh to develop, promote and regulate the profession of Chartered / Company Secretaries in Bangladesh. The Institute was initially established under a license from the Ministry of Commerce in 1997 as the Institute of Chartered Secretaries and Managers of Bangladesh (ICSMB) and subsequently was converted to Institute of Chartered Secretaries of Bangladesh (ICSB). The affairs of the Institute of Chartered Secretaries of Bangladesh (ICSB) are managed by a Council consisting of thirteen elected members and five nominees of the Government. The President is the head of the Institute. The major contribution of a Chartered Secretary is in the corporate sector. Chartered Secretary is a requisite qualification to become a Company Secretary. Company Secretary is an important professional, aiding the efficient management of the corporate sector. Company Secretary is a Statutory Officer under the Companies Act 1994. According to the Bangladesh Securities and Exchange Commission (BSEC), all the listed companies should have a Company Secretary. Company Secretary is the compliance officer of the company, who has to interact, coordinate, integrate and cooperate with various other functional heads in a company.

THE COUNCIL 2016-2019

Mohammad Sanaullah FCS : Mohammad Bul Hassan FCS : Md. Selim Reza FCS : Nazmul Karim FCS : Mohammad Asad Ullah FCS : Itrat Husain FCS : Md. Shahid Farooqui FCS : Safiar Rahman FCS : Md. Azizur Rahman FCS : A. K. M. Mushfiqur Rahman FCS : Gopal Chandra Debnath FCS : Md. Anwar Hossain Chowdhury FCS : Salim Ahmed FCS : Munshi Shafiul Haque, Additional Secretary (IIT), GoB : Nasreen Begum, Additional Secretary, GoB : Mohammad Abu Faruque, Joint Secretary, GoB : Prof. Md. Helal Uddin Nizami, Commissioner, BSEC : Md. Mosharraf Hossain, Registrar, RJSC, GoB :

EDITORIAL BOARD

Editor Prof. Dr. Feroz I. Faruque FCS Members Itrat Husain FCS Bazlur Rahman Sikder FCS Kazi Ashiqur Rahman FCS Subash Chandra Moulick FCS Mohammad Shahajahan FCS Md. Shiful Islam ACS

SUBSCRIPTION RATE

For Students Others

Design & Print

: per copy Tk. 100; per year Tk. 350 : per copy Tk. 150; per year Tk. 560

President Senior Vice President Vice President Treasurer Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor

IN THIS ISSUE

Editorial

Message from the President

The Council 2016-2019

Institute News

ARTICLES Glimpses of the Budget 2018-19 - Prof. Dr. Feroz I. Faruque FCS

PUBLISHED BY Institute of Chartered Secretaries of Bangladesh (ICSB)

(Established under Chartered Secretaries Act 2010 (Act No. 25 of 2010)

The views and opinions expressed in the articles published in this Journal are those of the writers only. ADMINISTRATIVE MINISTRY Ministry of Commerce Government of the People’s Republic of Bangladesh INSTITUTE OFFICE Padma Life Tower (8th Floor) 115 Kazi Nazrul Islam Avenue Bangla Motor, GPO Box No. 3100 Dhaka-1000, Bangladesh Phone : +88 02 933 9957, 933 4878, 933 6972, 4831 5338 +88 02 4934 9578, 933 6901 (Extn.-101-108) Fax : +88 02 933 9957 Mobile : 01708 030804 E-mail : secretary@icsb.edu.bd, icsb@icsb.edu.bd Web : www.icsb.edu.bd CAMPUS Padma Life Tower (7th Floor) 115 Kazi Nazrul Islam Avenue Bangla Motor, GPO Box No. 3100 Dhaka-1000, Bangladesh

Finance Act, 2018 (Amendments In Income Tax Ordinance, 1984) - Sadhan Chandra Das FCA, FCS

Performance of Section 186 of the Companies Act–1994: Apart or Half-part? - Bipul Kumar Bhowmik FCS

Pros and Cons of the National Budget of the FY 2018-19 - Mohammad Shahajahan FCS

Good Governed Corporate world for Sustainable Development - Md. Shiful Islam ACS

The Importance of Company Law in Economic Development - Prof. Dr. Feroz I. Faruque FCS

Notification

EDITORIAL

this issue...

CHARTERED SECRETARIES AS INCOME TAX PRACTITIONER

ational Board of Revenue (NBR) is the apex body for the revenue collection and management on behalf of the government. The revenue collected by the National Board of Revenue is the principal source of domestic resources for the implementation of the national budget. It is also the catalyst for scheming, planning and monitoring in achieving economic self-reliance. It wields influence on industrialization, trade and commerce and investment climate of the country. The roles, jurisdiction and main functions of the board of revenue include: (1) imposition, examination, monitoring and collection of direct and indirect taxes; (2) formulation of laws, rules, regulations on collection of direct and indirect taxes, and providing clarifications and explanations regarding their application; (3) monitoring and controlling the activities of organizations engaged in collecting import and export duties, value added tax, supplementary duties, excise and income taxes in a knowledge-based, just and customer-friendly environment; (4) providing assistance in the formulation process of tax policy and laws, signing of general cooperation agreements with international organizations and foreign countries, agreements on grants and loans and tax-related agreements; (5) fixing the jurisdiction and conditions for waiver and exemption of direct and indirect taxes; (6) curbing tax evasion and smuggling, implementation of import-export policies, preservation and flourishing of domestic industries and formulating official policies with the goal of attracting foreign investments.

and tax-laws, negotiating tax treaties with foreign governments and participating in inter-ministerial deliberations on economic issues having a bearing on ﬁscal policies and tax administration. The main responsibility of NBR is to collect domestic revenue (primarily, Import Duties and Taxes, VAT and Income Tax) for the government.

NBR is responsible for formulation and continuous re-appraisal of tax-policies

Prof. Dr. Feroz I. Faruque FCS Editor

Reference to section 174 of the Income Tax Ordinance, 1984 and Rule 37 of the Income Tax Rules 1984 which provides the eligibility of Chartered Secretaries as Income Tax Practitioner (ITP). We sincerely expect that the Chairman and Members of NBR will take necessary positive steps to include our members and profession as ITP and Mushak Agent in the Income Tax Ordinance and VAT law by issuing necessary SRO(s). For achieving the target Tax and VAT ﬁxed by the Govt. NBR should undertake all effective measures to extend its Tax and VAT net and bring minimum 10% of the total population under Tax and VAT net by 2041. In conclusion, I must say for assisting the NBR in its tax collection exercises more ITP should be engaged who will look for prospective assesses for their own interest and for the NBR of which Chartered Secretaries would be the most competitive and better choice by virtue of their strong professional background in the business and revenue ﬁelds.

April - June 2018 | 3

ear Professional Colleagues,

I am very much happy to express my heartfelt thanks to all my professional colleagues for all the achievements of the Institute which would not have been possible without the members who contributed as council members, committee members, academician, office staff so my continued thanks to them for their hard work and commitment. I am honored to have the opportunity to serve as the President of such a prestigious Institute (ICSB) for three terms. All you know that Bangladesh Securities and Exchange Commission (BSEC) recently released new Corporate Governance Code which will fulfill the demand or expectations of the corporate stakeholders of Bangladesh. We do hope this new Corporate Governance Code will also help to attract the foreign investors in Bangladesh as the investors from developed countries look for good governance according to the best practice of their respective countries. Again Bangladesh Securities and Exchange Commission also issued a notification for preparation, audit, disclosure and submission of periodical and annual financial statements which will also guide the listed companies in achieving good governance. I would like to take the privilege to express our heartfelt thanks to BSEC for their very timely effort for the development of corporate governance in Bangladesh.

ourselves in enhancing the knowledge, skills and abilities of our members who will lead in implementing Corporate Governance Code of BSEC. Our main aim is to meet the growing demand for professional chartered secretaries in the corporate sector irrespective of private and public in this new governance era and also to move corporate sector forward. I would like to expand the portfolio of our members and broaden our professional activities in the coming days. I am excited about the upcoming events of the ICSB this year and I am conﬁdent that our tradition of success will continue and we will make 2018 a successful year. We have Annual General Meeting in August 2018. We are going to organize National Convention and Convocation this year. We are also preparing for 4th ICSB National Award for Corporate Governance Excellence Award same as previous. In order to accomplish all these great events, we request your continued involvement in as many events as possible and to encourage other members who might not be involved in the events to become involved.

challenge

Now this is challenging time for Chartered Secretary professionals in adopting Corporate Governance in their respective corporate bodies. As the nation’s leader in the governance profession, we need

I would also like to hear your views and suggestions to plan for these events to meet your expectation of ICSB. I look forward to seeing you all in the upcoming events. May Almighty Allah always be with us.

Mohammad Sanaullah FCS

PRESIDENT

April - June 2018 | 5

MESSAGE FROM THE PRESIDENT

CHALLENGES FOR CHARTERED SECRETARY PROFESSIONALS IN ADOPTING CORPORATE GOVERNANCE

6 | April - June 2018

THE COUNCIL 2016-2019 Mohammad Abu Faruque Joint Secretary, GoB

Kazi Shamsul Alam

April - June 2018 | 7

THE 2ND QUARTER (APRIL – JUNE) OF THE YEAR 2018 WAS QUITE EVENTFUL FOR THE INSTITUTE

NTERNAL MEETINGS



Information Technology Sub Committee was held May 26, 2018

Meetings of the Standing Committees

Meetings of the following Standing Committees were held during the quarter: •

The Examination Committee meeting was held on May 12, 2018;

•

The Education Committee meeting was held on May 13, 2018;

•

The Executive Committee meeting was held on May 26, 2018;

•

The Membership & Registration meeting was held on May 26, 2018.

EXTERNAL MEETINGS Meeting with the Chairman, National Board of Revenue, Bangladesh

Committee

Meetings of Sub Committees Meeting of the following Sub Committees were also held during this quarter 

Journal & Publications Sub Committee meetings were held on April 02, April 16, May 26 and June 30, 2018;



Seminar & Conference Sub Committee meeting was held on April 03, 2018;



Professional Development Sub Committee meetings were held on April 03, June 28, 2018;



Dhaka Regional Chapter Sub Committee meeting was held on April 7, 2018;



Members’ Welfare & Recreation Sub Committee meeting was held on May 12, 2018.



Project Development & Implementation Sub Committee meetings were held on May 15, June 2, 2018;



International Relations Sub Committee was held on May 19, 2018;

8 | April - June 2018

ICSB delegates in the Pre-Budget meeting at NBR

A delegation of the Institute of Chartered Secretaries of Bangladesh (ICSB) led by its Vice President Mr. Md. Selim Reza FCS participated in a pre-budget meeting at the Conference Room of NBR Bhaban on April 9, 2018. ICSB members shared their proposal and views on National Budget 2018-19. Mr. Kazi Shamsul Alam, Secretary, ICSB and Mr. Md. Shamibur Rahman ACS, Director (A&F) were also present at the meeting.

authorized representative under the Income Tax Ordinance 1984 and as Mushuk Agent under the Value Added Tax and Supplementary Duty Act, 2012; so that they can appear before any income tax authority as authorized representative. The Chairman assured them that all out measures would be taken by NBR to include the ICSB profession as authorized representative under the Income Tax Ordinance 1984 and Mushuk Agent under VAT Act, 2012.

ICSB delegates with the Chairman of BSEC

A delegation of the Institute of Chartered Secretaries of Bangladesh (ICSB) led by its President Mr. Mohammad Sanaullah FCS called on Dr. M. Khairul Hossain, Chairman, Bangladesh Securities and Exchange Commission (BSEC) on May 3, 2018. First Corporate Governance Guideline was introduced in 2006 on comply or explain basis and letter on modiﬁed in 2012 on comply or else. President of the Institute discussed on the proposed Codes of Corporate Governance of Bangladesh and thanked the BSEC for proposing Corporate Governance code in place of guideline. Since the country is moving towards middle income country, in this transitional period, he urged the authority to formulate the Code taking into consideration of the present need of the corporate sector of Bangladesh. Mr. Md. Selim Reza FCS, Vice President, Mr. Md. Shahid Farooqui FCS, Council Member, Mr. Salim Ahmed FCS, Council Member, Mr. Kazi Shamsul Alam, Secretary, ICSB and Mr. Md. Shamibur Rahman ACS, Director (A&F) were also present at the meeting. Meeting with the Chairman, National Board of Revenue, Bangladesh

ICSB delegates with the Chairman of NBR

The ICSB delegate discussed with the Chairman on different aspects of the proposed national budget 2018-2019 and also requested the Chairman to reduce the individual tax rate from existing highest 30% to 25% and expand the tax net to collect more revenue and also to reduce the corporate tax to a reasonable level in order to attract both local and foreign investments. This measure would also boost up the industrial development of the country as well as creating employment opportunities. The Chairman had patience hearing and assured the ICSB delegate that, NBR will also look into the matter and would consider their proposals. Meeting with Commerce

Hon’ble

Secretary,

Ministry

A delegation of ICSB led by Mr. Mohammad Asad Ullah FCS, Immediate Past President and Council Member, Mr. Md. Azizur Rahman FCS, Council Member, Mr. A.K.M. Mushﬁqur Rahman FCS, Council Member, Gopal Chandra Debtath FCS, Council Member and Md. Anwar Hossain Chowdhury FCS, Council Member called on Mr. Md. Mosharraf Hossain Bhuiyan, NDC, Chairman, National Board of Revenue (NBR) at his Ofﬁce, Segunbagicha, Dhaka on Sunday, May 20, 2018. The ICSB delegate requested the Chairman, NBR to include the profession of Chartered Secretary as

ICSB delegates with the Secretary, Ministry of Commerce

A delegation of the Institute of Chartered Secretaries of

April - June 2018 | 9

INSTITUTE NEWS

Meeting with the Chairman, Bangladesh Securities and Exchange Commission

Bangladesh (ICSB) led by its President Mohammad Sanaullah FCS called on Shubhashish Bose, Hon’ble Secretary, Ministry of Commerce at the Bangladesh Secretariat on June 11, 2018. Md. Selim Reza FCS, Vice President along with Kazi Shamsul Alam, Secretary, ICSB and Md. Shamibur Rahman ACS, Director (A&F) were also present at the meeting. President of the Institute requested the Hon’ble Commerce Secretary to incorporate ICSB’s recommendations on the proposed Companies Act to strengthen good governance in the corporate sector. He briefed the Commerce Secretary about various development activities of the Institute including allotment of a RAJUK plot for ICSB. Hon’ble Commerce Secretary gave a patience hearing to the delegation and assured his whole hearted cooperation in the development of the Institute. Meeting with Hon’ble Secretary, Finance Division, Ministry of Finance

ICSB delegates with the Secretary, Ministry of Finance

A delegation of the council members of Institute of Chartered Secretaries of Bangladesh (ICSB) led by its President, Mr. Mohammad Sanaullah FCS called on Mr. Mohammad Muslim Chowdhury, Secretary, Finance Division, Ministry of Finance at his ofﬁce on June 24, 2018. The President, ICSB, briefed the Hon’ble Secretary on recent activities of ICSB and plan for its future development. He sought cooperation and support of the Secretary in the activities of the Institute. Hon’ble Secretary appreciated the role of ICSB in promoting professionalism and development of the Chartered Secretary profession in Bangladesh. He assured the delegation of his whole hearted support in the development of the Institute. Mr. Md. Selim Reza FCS,Vice President, Mr. Itrat Husain FCS, Past President, A.K.M. Mushﬁqur Rahman FCS, Council Member, Mr. Salim Ahmed FCS, Council Member, Mr. Kazi Shamsul Alam, Secretary and Mr. Md. Shamibur

10 | April - June 2018

Rahman ACS, Director (A & F) were present during the Meeting. Pohela Boishakh Celebration at ICSB ICSB celebrated the Bengali New Year 1425 “Pohela Boishakh” on April 14, 2018 with great enthusiasm and vigor, with the presence of a large number of members along with their spouses and children. A cultural programme of Bengali tradition including poetry recitation, folk song and dress as you like best for children were also organized during the occasion. The President of ICSB Mr. Mohammad Sanaullah FCS distributed the prizes among the winners being the Chief Guest of the occasion. Among others Mr. Md. Selim Reza FCS, Mr. Nazmul Karim FCS, Mr. Salim Ahmed FCS and Mr. Syed Moniruzzaman FCS were also present.

INSTITUTE NEWS

Doa and Iftar Mahfil

Members’ Welfare & Recreation Sub Committee of ICSB organized a Doa and Iftar Mahfil on June 8, 2018 at Alumni Association Auditorium, Senate Bhaban, Dhaka University. Mr. Mohammad Sanaullah FCS, President of the Institute, with a large number of Members including the Councilors and Office Bearers of the Institute attended the programme. Mr. Suhel Ahmed Choudhury, Past Secretary, Ministry of Commerce graced the Mahfil as special guest.

The programme ended with an enchanting cultural programme of Bengali tradition. Customary Bengali foods were also served among the participants.

April - June 2018 | 11

Essentials of Company Meetings, Procedure for Conducting Board/ Committee Meetings, Procedure for Conducting General Meetings including statutory meetings, AGM & EGM, Minutes & Resolution and Reports & Return. A good number of participants attended the training program. Internal Audit & Control Environment

In the welcome speech Mr. Salim Ahmed FCS, Council Member and Chairman, Members’ Welfare & Recreation Sub Committee of the Institute appreciated the Members for their participation in the programme despite their busy schedule and thanked all concerned for making the programme successful. A renowned Islamic scholar discussed about the values of Ramadan in our life and conducted the Doa.

TRAINING PROGRAMME The Institute organized the following training courses as a part of the Management Development Program: Management of Company Meetings

A day long Professional Training Program on “Management of Company Meetings” was held on May 12, 2018 at the Training Room of the Institute. Mr. Mohammad Sanaullah FCS, President of the Institute inaugurated the program and delivered the welcome speech. He highlighted on the effectiveness of the continuous training in his speech. Some important topics were covered in the training session such as

12 | April - June 2018

Four days Professional Training Program on “Internal Audit & Control Environment” was held from May 13 to 16, 2018 at the Training Room of the Institute. Mr. Mohammad Sanaullah FCS, President of the Institute inaugurated the program and delivered the welcome speech. He highlighted on the importance of the activities of the Internal Auditor in his speech. Some important topics were covered in the training session such as introduction to Internal Audit and Control Environment and its Effectiveness, Risk Based Internal Audit, Audit Planning, Controlling and Documentation, Audit Evidence, Frauds and Errors, Internal Control & Veriﬁcation, Management Audit, IT Based Audit and Audit Committee & It’s Function. A good number of participants attended the training program.

INSTITUTE NEWS

SUCCESS GREETINGS F-0067

Md. Selim Reza FCS Mr. Reza is a Fellow Member, Vice President and Council Member of the Institute. He is also a Fellow Member of the Institute of Chartered Accounts of Bangladesh and an Associate of the Institute of Personnel Management. Recently he joined Progressive Life Insurance Limited as an Independent Director.

F-0095

Mohammad Nurul Alam FCS Mr. Mohammad Nurul Alam is a Fellow Member of this Institute. He has been working as the Chief Compliance Officer at Banglalink Digital Communications Ltd. He passed CCPE-I a global Certification on Corporate Compliance and Ethics Professional. The Certified Compliance & Ethics Professional–International (CCEP-I)® awarded to him by the Society of Corporate Compliance and Ethics, USA. Companies listed in US stock exchanges like Nasdaq requires a Compliance Professional to ensure compliance of international regulations including FCPA and Anti-Bribery and Corruption laws.

F-0149

Mohammad Shahajahan FCS Mr. Mohammad Shahajahan FCS, CPFA, Additional Deputy Comptroller and Auditor General (Reserve) is now in lien and working as Individual Consultant (Manager: Financial Management), National Agricultural Technology Program: Phase-II (NATP-2) Project, a ﬂagship project of the Ministry of Agriculture, The Peoples Republic of Bangladesh. He is a member of 24th Bangladesh Civil Service (BCS), Audit & Accounts Cadre and fellow member of ICSB. On 10th May 2018 he has achieved the full professional membership (Chartered Public Finance Accountant-CPFA) of the Chartered Institute Public Finance and Accountancy (CIPFA), UK. His CIPFA Membership no. is 34032-CIP.

A-0350

Santush Chandra Sarker ACS Mr. Sarker is an Associate Member of this Institute. He has been promoted as Senior Principal Ofﬁcer (SPO), SME & Agriculture Investment Division in First Security Islami Bank Limited. Prior to this he was Principal Ofﬁcer (PO).

April - June 2018 | 13

A-0351

Md. Mijanur Rahman ACS Mr. Rahman is an Associate Member of this Institute. He joined Fareast Islami Life Insurance Company Limited as a Joint Vice President and successfully served from 2009 to 2017. He has joined in Chartered Life Insurance Company Limited as Company Secretary. Prior to this he worked as Manager Company Affairs in Jamuna Group.

A-0360

Mohammed Saifullah ACS Mr. Saifullah is an Associate Member of this Institute and has passed LL.B under National University. He has been promoted as General Manager (Accounts & Tax) (Grade # 3) from Deputy General Manager (Accounts & Tax) on May 20, 2018 in Bangladesh Sugar & Food Industries Corporation (BSFIC). Prior to this position he was in charge of Company Affairs in three listed companies of the organization.

A-0367

Md. Obaidur Rahman ACS Mr. Rahman is an Associate Member of this Institute. He has been promoted as Assistant Vice President (AVP) and Assistant Company Secretary in Jamuna Bank Limited. Prior to this he was First Assistant Vice President (FAVP) & Assistant Company Secretary.

A-0369

Md. Jaber Parvez ACS Mr. Parvez is an Associate Member of this Institute. He has recently joined in Southeast Bank Limited as Ofﬁcer, Board Division. Prior to joining this company he was the Corporate Lawyer of Advisers' Legal Alliance. Mr. Md. Jaber Parvez has more than 08 (eight) years of working experience in the legal ﬁeld. He is an Advocate of the Supreme Court of Bangladesh and also a member of the Dhaka Taxes Bar Association (DTBA).

A-0396

Md. Delowar Hossain ACS Mr. Hossain is an Associate Member of this Institute. He has joined Conﬁdence Cement Limited as Company Secretary on March 11, 2018 and before joining that he had been serving at S.Alam Group as Group Assistant Company Secretary from March 23, 2016 to 06 March 2018.

14 | April - June 2018

TRAINING PROGRAMME

Training Programmes for the Year 2018

SL No.

Name of Training

Duration

Customs & VAT Management

4 Days programme

Tax Management

4 Days programme

Company Secretarial Practice

1 Week programme

Labour Management

1 Week programme

Domestic Enquiry

3 Days programme

Corporate Governance Practice

1 Week programme

All Round Leadership

1 Week programme

Fund Management

3 Days programme

Finance for Non-Finance Executives

1 Week programme

Effective Audit Committee

3 Days programme

Compliance for Banking Companies

3 Days programme

Budget Preparation

3 Days programme

English Language Course

3 Days programme

For further details, please contact with the following official: Mr. Md. Kamrul Islam Khan Assistant Director â&#x20AC;&#x201C; HR & General Admin, ICSB Cell: 01716 846574, Email: hr@icsb.edu.bd

April - June 2018 | 15

www.icsb.edu.bd

July â&#x20AC;&#x201C; December 2018

Articles April - June 2018

ARTICLE

GLIMPSES OF THE BUDGET 2018-19 Prof Dr Feroz I. Faruque FCS, FCCE

he size of the budget is Tk. 464,500 crore, having a deficit of Tk. 125293 crore, 16 percent bigger than the immediate past one. The budget has already generated a very widespread debate and discussions in the country. The budget has largely been described as a business as usual one, nothing new or innovative as reflected in both of its incomes and expenditures sides. GDP growth target of 7.8 percent is not an unrealistic expectation as the last fiscal has seen a 7.28% growth. In order to achieve the estimated growth, the investment to GDP ratio will have to be enhanced by 4 percentage points. It is not impossible to improve the investment by 4 percentage points in a year, if the political situation remains non volatile. The government plans to bring more people under the social safety net program in the next budget without raising the allowance per person in most of the schemes. The number of beneficiaries, who get allowances and food under the program, will go up by around 10 lakh to 96 lakh in fiscal 2018-19. In the last fiscal year, the government allocated Tk. 54,206 crore for the program, which accounted for 13.54 percent of the total outlay. The amount will cross Tk. 65,000 crore in the current budget. The increase in the allocation for social safety net program is a good step but it is still short of the desirable allocation, special attention is required to minimize leakages, as many deserving beneficiaries could not make way to receive the benefits of the schemes. The tax collection will have to be raised by 40 percent to implement the new budget. But there is no reform in the tax system to achieve the expected revenue collection. The main challenge for the budget will be to increase the private sector investment, which has remained stagnant for few years now, affecting job creation negatively. The optimistic thing in the budget is that the public sector investment is growing significantly. Some measures are there in the new budget to accelerate the investment. The budget has not increased the tax rate or brought more people under the tax net. The proposal to impose 28 percent duty on rice imports in a good step for farmers to get

higher prices for their produce. As a result, it will be challenging to finance the budget. Inflation will be another challenge and there was no measure in the budget to manage it. The budget lacks special measures which could boost revenue collection, increase expenditure, bring reforms to narrow deficit and to keep the situation stable ahead of elections. The budget has maintained all the positive and negative tendencies of the past. There is no structural and policy change and there is no surprise, the budget “status quo” because it largely reflected the economic policies and tendencies seen in successive budgets in Bangladesh. If the consistency in exports and remittance is not maintained, it will affect the exchange rate, the rate of interest and inflation. Banking sector is facing a huge crisis, but nothing about it in the budget. It is now widely recognized that the commercial banking sector, in particular state-owned banks in Bangladesh, has serious liquidity problems. In effect, these banks can be described as 'Zombie banks'' and are in need of continuous flow of recapitalization out of public money for their day-to-day survival. If sweeping measures are not taken now, it will create serious problem for Bangladesh Bank also, threatening the very monetary stability of the country. Reducing the tax burden of the rich (e.g. large bank share-holders and the like) with lower marginal income tax rates or corporate tax rates (which, it is argued, will eliminate or reduce incentives to avoid and evade tax) will only further lead to increased income inequality. Such a tax system obviously disputes the well-established principle that progressivity is central to equity and fairness in a taxation system. Such a principle is no longer a valid criterion of taxation in the present days. It would be comparatively wiser to borrow from the banking sector in the coming days by way of cutting reliance on the national savings certificates. Corporate tax reduction will not benefit the public and there is no logic behind it. It will only increase the profit for the owners. No depositors and borrowers will benefit from the tax cut. There is no logic to grant the tax benefit

April - June 2018 | 17

at all. This type of system is completely immoral and useless when there is chaos in the banking sector. I have repeatedly recommended that the tax free income slab should have been increased to Tk.350000 from existing income tax ceiling of Tk. 2.5 lakh for individuals to protect the real income of the people because their income has eroded because of inflation. While there has been inflation about 6% a year on average. Surprisingly for last three fiscal years it has been same despite inflation is there, but it was not changed even at the officially declared inflation rate. Rather, the government has increased the perquisite benefit for the rich from Tk. 4.75 lakh to Tk. 5.50 lakh. What type of economic policy is it that can increase the perquisite benefit for the rich but won't give protection to the poor? It is also questionable that VAT is raised on apartments below the size of 1100 square feet and lowered the rate for the apartments over 1100 sq ft to 1,600 sq ft. Through this a major pressure is being created for the low income group. On the other hand, rebate has been given to the rich. Surcharge has been imposed on having two cars in the same name and having housing property 8000 sq.ft. in the city corporation area. Any tobacco products should have been taxed heavily as many people are having serious health hazards due to tobacco consumption. In case of Value Added Tax (VAT) on goods and services, there will be five slabs, instead of existing nine, but the VAT rates will not be increased. For second hand flat 2% VAT will be imposed up to 1600 sq.ft, and for above 1600 sq.ft flat it will be 4.5%. For flat up to 1100 sq.ft VAT will be 1.5%, and from 1101to 1600 sq.ft it will be 2.5%. There are above 30 lakh TIN holders in Bangladesh now. There is the chance of increasing oil price, food price and metal products price in the international market, which will create additional pressure on the budget. In many cases police is abusing the e-trafficking prosecution and fine payment system. Another major focus in the budget is on speeding up implementation of ten mega infrastructure projects, including Rooppur Nuclear Power Plant, Padma Bridge, Padma Rail Link and Metro Rail. For the projects, Tk. 32,555 crore has been set aside, which is around 19 percent of the development budget. Besides, some other mega projects such as Dhaka Underground Metro Rail, circular railway and the second Padma Bridge have been included in the Annual Development Program (ADP).

18 | April - June 2018

In the budget outline for the universal pension system has been introduced primarily in the private sector. Under the scheme, private sector employees will make a voluntary contribution to the pension fund. If an employee resigns from an organization and joins another, his contribution will be transferred. To materialize the idea, several subsidiary institutions will be established. Those include pension enrolment office, pension trust, central record-keeping agency, trustee bank, pension fund managers and annuity service providers. In the next fiscal year, the government will also provide housing loans to around 14 lakh government employees at low interest rates. Loans between Tk. 75 lakh and Tk. 20 lakh will be disbursed in three categories depending on location of the property. The interest rate will be 10 percent, of which 5 percent must be paid by the loan applicants and the rest will come from government subsidy. The tenure for repaying the loans will be 20 years. Public borrowing accounts for 26 per cent of total income in this budget. Overall, the level of debt in Bangladesh has been rising over time. But the ratio of external debt to GDP is on the decline while the ratio of domestic debt to GDP is rising. Increasing share of domestically held public debt enable the country to use domestic resources to service it; in fact, domestic payment of debt involves only a transfer of income from Bangladeshi taxpayers to Bangladeshi bond holders. However, if tax payers and bond holders are different people that will lead to income redistribution causing income inequality. But servicing external debt will require sacrificing resources in the form of reduced consumption. About 75 per cent of external debt Bangladesh owes to two institutions - The World Bank (WB) and the Asian Development Bank (ADB). Direct taxes constitute only about 30 per cent of total tax revenue and less than 2.0 per cent of population pay income tax. Tax reforms over the last decades have not changed anything much because the problems associated with the taxation regime in Bangladesh is systemic. More problematic is when direct taxation system is marked by differential rates as happened in this budget to reduce corporate tax rate for banks and other financial institutions. The logic advanced was that this would reduce the lending rates thus stimulating investment. The bank lending rates are based on a variety of factors not on tax alone, and in particular, factoring in the risk factor arising from loan defaults-a phenomenon rather very widespread in Bangladesh.

ARTICLE In the country’s drive to pursue economic growth through industrialization, the key mantra is to create a capital-friendly taxation system. That is reflected in the widespread use of tax incentives, including tax exemptions for domestic capital. At the same time the need to attract foreign direct investment (FDI) also requires to create a business-friendly environment that enables them to operate in their own ways. That is clearly evident in the present budget. Corporate tax rates have been reduced for a number of industries and the dominant ready-made garment (RMG) industry still continues to enjoy a much lower rate of corporate taxes despite a very nominal increase in the rate in this budget. Problem of FDI in Bangladesh is super bureaucracy and corruption otherwise FDI policy of Bangladesh is one of the best in the world. Bangladesh has a very narrow tax base. Besides, widespread tax exemptions and incentives, special tax regime for state-owned enterprises, and inefficient (often also corrupt) tax administration have resulted in the low tax to GDP ratio which stands at around 11 per cent. Tax enforcement in Bangladesh is considered to be seriously compromised as a result of the prevalence of widespread corruption. Surprisingly a minister suggested cutting down customs duty on liquor for the sake of flourishing tourism in the country, same kind of recommendation-budget proposal was made by a late finance minister who presented 12 budgets of Bangladesh. Tourists do not come to a country for low price of liquor, which is not at all the attraction of a tourist to come to a country. Opposition MPs rightly continued their scathing attacks on Finance Minister in the Parliament for his 'failure' to restore discipline in the banking sector. The whole nation demands stern punishment for the people involved in misappropriating money from the country's banks. The government is continuing to treat banks with kid gloves instead of going tough on them for the rampant financial irregularities and continued poor judgment. Leading chambers and trade bodies criticized the government's 2.5 percent corporate tax cut proposal for only banks and financial institutions in fiscal 2018-19, saying the move would not bring in the desired private or foreign investments. The budgetary measures for fiscal 2018-19 will benefit the high and low income people, leaving the middle- and lower

middle-class, which form the majority of Bangladesh's population. Government plans following Europe's footsteps to tap digital marketing's popularity, introducing provisions on tax earnings of networking tech giants such as Facebook, Google and Youtube. Inadequate discussion on Supplementary Budget was not desirable though the finance minister apologized for his inability to create an opportunity to hold elaborate discussions on supplementary budget in the parliament. The government is going to connect the national savings certificate (NSC) buyers' database with that used in the creation of national identity (NID) cards to prevent the certificates from going into the hands of ineligible people. The government will bring an end to the vulnerable situation public jute mills are in by running those under the public private partnership (PPP) model. A corporate tax cut for listed banks, insurance companies and financial institutions and announcement of development measures for the bond market are the only achievements of stock investors from the budget announced for FY 2018-19.Customer will have to pay more for products and service bought from one's mobile phone as the government introduced a 5 percent value-added tax on those and also raised the surcharge on handset imports. Interest payments get the fourth highest allocation, which is also higher than the combined allocation for health, social security and welfare in the proposed budget for 2018-19.

» About the Author Fellow Member of the Institute & Former Senior Vice President

April - June 2018 | 19

FINANCE ACT, 2018 (AMENDMENTS IN INCOME TAX ORDINANCE, 1984) Sadhan Chandra Das FCA, FCS

ndividual tax rate

There is no change in the individual tax rate except that the exemption limit of parents or legal guardians of each disabled person shall be Tk. 50,000 more than the normal exemption limit. However the rates of individual tax are reproduced below with the change. A

General Tax Rate on first Tk. 250,000 Nil on next Tk. 400,000 10% on next Tk. 500,000 15% on next Tk. 600,000 20% on next Tk. 3,000,000 25% on balance of total income 30% Tax rate for women and senior citizen (65 years and above) on first Tk. 300,000 Nil on next Tk. 400,000 10% on next Tk. 500,000 15% on next Tk. 600,000 20% on next Tk. 3,000,000 25% on balance of total income 30% Tax rate for disabled persons on first Tk. 400,000 Nil on next Tk. 400,000 10% on next Tk. 500,000 15% on next Tk. 600,000 20% on next Tk. 3,000,000 25% on balance of total income 30%

Tax rate for war wounded freedom fighters on ﬁrst Tk. 425,000 on next Tk. 400,000 on next Tk. 500,000 on next Tk. 600,000 on next Tk. 3,000,000 on balance of total income Tax rate for parents or legal guardian (male) of disabled persons on first Tk. 300,000 on next Tk. 400,000 on next Tk. 500,000 on next Tk. 600,000 on next Tk. 3,000,000 on balance of total income Tax rate for parents or legal guardian (Female/maleof the age of 65 or above) of disabled persons on ﬁrst Tk. 350,000 on next Tk. 400,000 on next Tk. 500,000 on next Tk. 600,000 on next Tk. 3,000,000 on balance of total income

Nil 10% 15% 20% 25% 30% Nil 10% 15% 20% 25% 30%

Nil 10% 15% 20% 25% 30%

In case of parents or legal guardians of disabled persons, if both the male and female are taxpayer, anyone shall get the beneﬁt. Minimum tax payable by a individual whose total income exceeds the maximum exemption limit is Tk. 5,000 for Dhaka North City Corporation, Dhaka South City Corporation and Chittagong City Corporation area, Tk. 4,000 for other City Corporation area and Tk. 3,000 for other areas.

Slab of wealth for imposing surcharge onindividual tax payers Net Wealth If net wealth does not e xceed Tk. 2.25 crore If net wealth exceeds Tk. 2.25 crore but does not exceed Tk. 5 crore. Or if the assessee owns more than one motor cars in his/her own name. Or if he/she owns a house property having an aggregate area of more than 8,000 sft. in a city corporation area. If net wealth exceeds Tk. 5 crore but does not exceed Tk. 10 crore If net wealth exceeds Tk. 10 crore but does not exceed Tk. 15 crore If net wealth exceeds Tk. 15 crore but does not exceed Tk. 20 crore If net wealth exceeds Tk. 20 crore

20 | April - June 2018

Rate of Surcharge Nil 10% of tax

Minimum Surcharge Nil Tk. 3,000

15% of tax 20% of tax 25% of tax 30% of tax

Tk. 5,000

ARTICLE Tax rate for manufacturers of Tobacco products (No change) 45% tax will be levied on manufacturers of all kinds of tobacco products viz. cigarettes, biri, jarda, gul etc. irrespective of company or non-company tax payers. Surcharge for tobacco manufacturers (No change) 2.5% surcharge will be imposed on the business income of all sorts of tobacco manufacturers, i.e. cigarettes, biri, jarda, gul etc. New reduced tax rate of RMG Category

Holding Green Building Certiﬁcation Others (If listed) Others (If not listed )

Previous New reduced reduced tax rate tax rate 10% 12% 12% 12%

12.5% 15%

New tax rate of Bank, Insurance and other NBFI Bank, Insurance and other NBFI (except Merchant Banks) If listed If not li sted (Foreign bank, insurance and other NBFI) Bank, Insurance and other NBFI which were approved by the Govt. in 2013 (Listed or non listed) - i.e. 3rd generation banks.

Previous tax rate on income 40% 42.5%

New tax rate on income 37.5% 40%

40%

37.5%

Provided further that if such company transfer minimum 20% of it’s paid up capital through initial public offerings (IPO) such company shall get 10% tax rebate on tax payable on that particular assessment year. Tax rate on Dividend Income of a Company (No change) Tax rate of Dividend Income of a Company is 20% of such income. Tax rate of Non-resident Expatriate Persons (No change) The tax rate of a Non-resident Expatriate Person not being a Company (except Non Resident Bangladeshi) is 30% of his/her income. Tax rate of Co-operative Societies (No change) The tax rate of Co-operative Societies registered under Co-operative Societies Act, 2001 is 15% of income. Change in the definition of Charitable Purpose of section 2(16) The term advancement of any other object of general public utility was not deﬁned. Now the following 2 conditions inserted: i)

It does not involve carrying out any activities in the nature of trade, commerce or business, or

ii)

Where it involves any service rendered for a consideration, the aggregate value of such consideration in the income year does not exceed Tk. 20,00,000.

Tax rate of Merchant Banks (No change)

Explanation inserted in Clause 31 in Section 2

Tax rate of Merchant Banks is 37.5% of income.

Explanation- For the removal of doubts, it is hereby declared that in this clause, “fees for technical services” shall include technical services fee, technical assistance fee or any fee of similar nature.

Tax rate of Mobile Phone Operator Company (No change) Tax rate of Mobile Phone Operator Company is 45% of income. Provided that such company constructed in to publicly traded company by minimum transfer of share of 10% of paid up capital not more than 5% of per-initial publicly offering placement through the stock exchange, in that case the rate of tax will be 40% of income.

Insertion of Clause 44A in Section 2 By inserting the above new clause, Permanent Establishments (PE) have been deﬁned as under: Permanent Establishment (PE) means a place or activity through which the business or profession is wholly or partly carried on and includes the following: •

A place of management, a branch, an agency, an ofﬁce, a warehouse, a factory, a workshop

April - June 2018 | 21

•

A mine, oil or gas well, quarry or any other place of exploration, exploitation or extraction of natural resources

•

A farm or plantation

•

A building site, a construction, assembly or installation project or supervisory activities

•

The furnishing of services including consultancy services in Bangladesh

The previous sub-section (21) has been substituted by the following –

•

Any associated entity or person that is commercially dependent on a non-resident person where the associated entity or person carries out any activity in Bangladesh in connection with any sale made in Bangladesh by a non-resident person.

“(21) Where any sum is claimed or shown to have been received as loan or gift by an Assessee otherwise than by a bank transfer, the amount so received shall be deemed to be the income of such Assessee for the income year in which such loan or gift was received, and shall be classiﬁable under the head “Income from other sources”.

Replacement of Sub-section (2) of Section 18 In section 18, sub-section (2) has been replaced by the following new sub-section: (2) any income accruing or arising, whether directly or indirectly, through or from(a) any permanent establishment in Bangladesh; or (b) any property, asset, right or other source of income, including intangible property, in Bangladesh; or (c) the transfer of any assets situated in Bangladesh; or (d) the sale of any goods or services by any electronic means to purchasers in Bangladesh; or

the transfer of an asset situated in Bangladesh to the extent that the value of the share transferred is directly or indirectly attributable to the value of any assets in Bangladesh. Replacement of sub-section (21) repealing sections (21A), (21B), (26) and (28) of section 19

Provided that(a) where a loan or part thereof, which was deemed as the income under this sub-section and included in the total income of the Assessee, is repaid in a subsequent income year, the amount so repaid shall be deducted in computing the income of the Assessee for that income year; (b) a loan shall not be deemed to be an income under this sub-section if the loan is taken from a banking company or a ﬁnancial institution; (c) a loan or a gift received by an Assessee, being an individual, shall not be deemed to be the income under this sub-section, if(i)

the aggregate amount of such loan or gift received in an income year does not exceed ﬁve lakh taka; or

(ii)

the loan or the gift is received from spouse or parents of the Assessee, and a banking channel or a formal channel is involved in the process of such loan or gift.

(e) any intangible property used in Bangladesh. Explanation.- For the purpose of clause (2)(a) the shares of any company which is a resident in Bangladesh shall be deemed to be property in Bangladesh; (b) intangible property shall be deemed to be property in Bangladesh if it is(i)

registered in Bangladesh; or

(ii)

owned by a person that is not a resident of Bangladesh but has a permanent establishment in Bangladesh to which the intangible property is attributed;

22 | April - June 2018

Explanation- In this sub-section, “bank transfer”, in relation to a loan or a gift, means transfer from the account of the giver to the account of the receiver, and such accounts are maintained in a bank or a ﬁnancial institution legally authorised to operate accounts.”; The above change will not make any difference in the provisions of law but it is a good attempt in the sense that the users will get all loan or gift related issues in one section.

ARTICLE The issues are: i)

ii)

iii)

Any sum received by an assessee as loan or gift in an income year from the initial capital of business or profession of another person within the period of limitation. Transfer of initial capital of business or profession shown in the tax return ﬁlled u/s 82BB partly or fully within the period of limitation. Any amount received as loan by a company from any other person otherwise than by a crossed cheque or by bank transfer.

iv) Amount exceeding Tk. 5,00,000 received by an individual as loan or gift from any other person otherwise than by a crossed cheque or by bank transfer. Change in section 30 of ITO 1984 Section 30(aaaa)

technical assistance fee or any fee of similar nature, as exceeds the following: (i) For the ﬁrst three income years from the commencement of the business or profession (ii) For subsequent income years

Ten percent (10%) of the net proﬁt disclosed in the statement of accounts; Eight percent (8%) of the net proﬁt disclosed in the statement of accounts;

Insertion of explanation to Paragraph- 9 of the 4th Schedule In the above Paragraph the following explanation has been inserted : Explanation- For the removal of doubts, it is hereby declared that the provisions of section 30 shall apply in allowing management expenses or any other expenses under this Schedule.

Salary will be disallowed if the employer fails to submit statement u/s 108A within 30th April each year regarding return ﬁling information of the employees containing the following:

Replacement of Sub-section (3) of Section 35

Name, designation and TIN

ii.

Date of submitting return

iii.

Serial number of return submission

(3) Without prejudice to the preceding sub-sections, every company as defined in the Companies Act, 1913 or Companies Act, 1994 shall, with the return of income required to be filed under this Ordinance, furnish a copy of the trading account, profit and loss account and the balance sheet in respect of the relevant income year-

Every employee will submit the same information to their employer within 15th April each year. However it would not be applicable for Govt. employees. Section 30(e) Allowable ceiling of perquisites has been raised from Tk. 4,75,000 to Tk. 5,50,000. Section 30(g) Expenditure head “Head ofﬁce expense” will be replaced by “Head ofﬁce expense or intra-group expense called by whatever name”. Replacement of Clause (h) of Section 30

In section 35, sub-section (3) has been replaced by the following new sub-section:

(a) certiﬁed by a chartered accountant to the effect that the accounts are(i)

maintained and the statements are prepared and reported in accordance with Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS) or in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as adopted in Bangladesh; and

The above clause has been replaced by the following:

(ii) audited in accordance with the Bangladesh Standards on Auditing (BSA);

Clause (h) of so much of the expenditure or aggregate of the expenditure by an assesse by way of royalty, technical services fee, technical know how fee or

(b) signed by the persons including as many directors as required under sub-sections (1) and (2) of section 189 of Companies Act, 1994.

April - June 2018 | 23

Change in TDS The details of changes in withholding tax rate, and introduction of new area of withholding tax are summarized below: [Section 52 to 56] Sl No. 01.

02.

03.

Head of Income from which tax is Section/R Previous rate to be deducted/collected ule Vehicle rental service or ride 52AA 3% where base sharing service amount does not exceed Tk. 25 lakh, 4% where base amount exceed Tk. 25 lakh Service charge on services 52Q 10% provided by a resident to any foreign person

52S

04.

Banderol of cold drinks, soft drinks or mineral water Local L/C

52U

3% on proceeds exceeding Tk. 5,00,000

05.

Cash Dividend

Company to Company 20%

06.

Non resident

24 | April - June 2018

Several rates

New rate Rate unchanged. Ride sharing service included.

No change in rate- new Proviso added. “Provided that no deduction under this section shall be made against the remittance from abroad of the proceeds of sales of software or services of a resident if the income from such sales is exempted from tax under paragraph 33 of Part A of the Sixth Schedule.” Deleted Old 52U substituted. New provision is as under: * 3% of the amount paid or credited in relation to purchase of goods for the purpose of trading or of reselling after process or conversion * 1% of the amount paid or credited in relation to goods invoiced to a person under a ﬁnancing arrangement Rate unchanged. New proviso added as under“Provided that the provision of this section shall not be applicable to any distribution of taxed dividend to a company being resident in Bangladesh if such taxed dividend enjoys tax exemption under the provisions of the paragraph 60 of Part A of the Sixth Schedule.” Rates unchanged. New provisions added as under – TDS under this section shall be deemed to be the minimum tax and shall not be subject to refund or set-off or adjustment.

ARTICLE Insertion of Sub-section (3) of Section 58

Insertion of new sub-section (8A) u/s 82C

In section 58, the following new sub-section (3) has been inserted:

By inserting the above new sub-section it has been provided that where tax has been mistakenly deducted or collected in excess or deﬁcit of the due amount then minimum tax shall be computed based on the due amount.

(3) Every person who has deducted or collected any tax under this Chapter shall furnish a statement to such income tax authority and in such manner as may be prescribed. Amendment in Section 75 of ITO, 1984 a.

By inserting item (x) in sub-section (1), ﬁling of return has been made compulsory for person participates in a ride sharing arrangement providing motor vehicles. By inserting Clauses (iiia) and (iiib) in sub-section (2), it has been provided that, return ﬁling is not mandatory fori.

Non-resident company having no permanent establishment in Bangladesh

ii.

Non-resident individual having no ﬁxed base in Bangladesh.

Inclusion in the list of tax free income-Sixth Schedule (Part-A), Paragraph-58 to 60 By amending paragraph 58 and inserting new paragraphs 59 and 60 the following has been exempted from tax : i)

ii)

iii)

Any income derived from the operation of an elderly care home or a day care home for children [Para-58] Any income derived from the operation of an educational or training institution runs exclusively for persons with disability [Para-59] Any distribution of taxed dividend to a company being resident in Bangladesh if the company distributing such taxed dividend has maintained separate account for the taxed dividend. [Para-60]

Insertion of new Clause (c) under Sub-section (7) of Section 82BB By inserting the above clause, a new condition has been added to keep the assessee out of the scope of tax audit i.e. the assessee shall have to comply with the provision of section 75A, 108 and 108A.

Insertion of new Section 108A 108A. Information regarding ﬁling of return by employees.- (1) Every employee shall furnish the following information to the employer by the ﬁfteenth day of April each year(i)

Taxpayer’s Identiﬁcation Number;

(ii) Date of filing of the return of income; and (iii) The serial number provided by the income tax authority upon filing of the return of income. (2) Any person responsible for making any payment which is an income of the payee classifiable under the head "Salaries", shall, by the thirtieth day of April of each year, furnish to such income tax authority and in such manner as may be prescribed, a statement containing the following information regarding the payee:(i)

The name, designation and the Taxpayer’s Identiﬁcation Number;

(ii) Date of filing of the return of income; (iii) The serial number provided by the income tax authority upon filing of the return; (3) Nothing in this section shall apply to a payment made by the Government. Insertion of new Section 113A 113A. Automatic furnishing of information.- (1) The Board may, by a notice in official gazette, require any authority, person or entity to furnish in digital manner to the Board or any income tax authority specified by the Board, any information including information regarding assets, liabilities, income, expenses and transactions in respect of any class of persons. (2) The information mentioned in sub-section (1) shall be furnished in such digital manner as may be specified in the notice.

April - June 2018 | 25

(3) For the purpose of this section, furnishing in digital manner includes(a) uploading data in the system of the Board;

153. Appeal to appellate income tax authority.- (1) Any person aggrieved by order of an income tax authority regarding the following matters may appeal to the respective appellate income-tax authority-

(b) sharing data to the digital or electronic system of the Board; and

(i)

(iii) set off or carry forward of loss;

Amendment in Section 124- Change in Penalty for non submission of return

(v) charge and computation of surcharge or any other sum;

By amending section 124, rate of penalty for non submission of returns/statement has been changed as under:

(vi) credit of tax; and

Particulars For non-submission return u/s 75, 77, 89, or 93 For non-submission return u/s 75A statement u/s 108 information u/s 108A

of 91 of or or

Rate of Penalty Tk. 5,000 + Tk. 1,000 for continuing default 10% of the last assessed tax or Tk. 5,000 whichever is higher + Tk. 1,000 for continuing default

Replacement of Clause (a) of Sub-section (2) of Section 143 In section 143, clause (a) of sub-section (2) has been replaced by the following: (a) from whom any money or goods is due or may become due to the assessee, or who holds, or controls the receipt or disposal of, or may subsequently hold, or control the receipt or disposal of, any money or goods belonging to, or on account of, the assessee, to – (i)

pay to the Deputy Commissioner of Taxes the sum speciﬁed in the notice on or before the date speciﬁed therein for such payment; or

(ii)

stop the transfer of that goods to the assessee or the placement of that goods under the disposal of the assesse until the amount of tax mentioned in the notice has been paid or a satisfactory arrangement has been made with the Deputy Commissioner of Taxes for payment of such tax; or

Replacement of Section 153 Section 153 has been replaced by the following new section:

26 | April - June 2018

assessment of income;

(ii) computation of tax liability or refund; (iv) imposition of any penalty or interest;

(vii) payment of a refund. (2) Subject to sub-section (3), an appeal in the following cases shall be made only to the Commissioner of Taxes (Appeals)(i)

appeal by a company;

(ii) appeal against an order under section 120; (iii) appeal against an order of adjustment or penalty involving international transactions as deﬁned in 107A; (iv) appeal against an order, in matters mentioned in sub-section (1), made by an income tax authority in the rank of a Joint Commissioner of Taxes or above. (3) The Board may(i)

assign any appeal to any appellate income-tax authority;

(ii) transfer an appeal from one appellate income-tax authority to another appellate income-tax authority. (4) No appeal shall lie in respect of an income which is computed as a share of the taxed income. (5) No appeal shall lie against any order of assessment in the following cases(i) Where the return of income was ﬁled (ii) Where no return of income was ﬁled

if tax under section 74 has not been paid if at least ten per cent of the tax as determined by the Deputy Commissioner of Taxes has not been paid

ARTICLE Provided that where the tax on the basis of return has been paid by the appellant before filing the appeal and the appellate income-tax authority is convinced that the appellant was barred by sufficient reason from paying the tax before filing the return, it may allow the appeal for hearing. Explanation.- In this section, appellate income-tax authority means the Commissioner of Taxes (Appeals) or the Appellate Joint Commissioner of Taxes, as the case may be. Insertion of Section 166A 166A. Punishment for providing false information, etc.A person is guilty of an offence punishable with imprisonment which may extend to three years or with fine, or with both, if he is in possession of any information in relation to an assessee and after being required to furnish the information to an income tax authority under this Ordinance – (a) conceals the information; or (b) deliberately furnishes inaccurate information.” Insertion of new Section 169A The following new section 169A has been inserted: 169A. Further enquiry and investigation, etc. for prosecution.- The Deputy Commissioner of Taxes, with prior approval of the Commissioner of Taxes, may make such enquiry and investigation, in addition to the enquiry already made under this Ordinance, as may be necessary for the purpose of prosecution of an offence under this Chapter or a tax related offence under Money Laundering Prevention Act, 2012. Insertion of new sub-section (4) u/s 178 (4) In this section(a) “electronic mail” shall have the same meaning as assigned to electronic mail by ICT Act, 2006;

(ii)

that has been speciﬁed by a person, in writing, to the income tax authority, as the electronic mail address of such person.

Insertion of item (xxxii) in Section 184A(3) By inserting the above item TIN has been made mandatory for participating in a ride sharing arrangement by providing motor vehicle. Deletion of Section 184BBB A person having TIN and BIN was supposed to be given a Unified Taxpayer’s Identification Number (UTIN). This provision has been withdrawn. Insertion of explanation in Section 184BBBB In the above section the following explanation has been inserted: Explanation- For the removal of doubts, it is hereby declared that nothing in this Ordinance shall limit the authority of the Deputy Commissioner of Taxes in imposing the liability to pay any sum under this Ordinance on a person who has been given a Temporary Registration Number (TRN) for the reason that the person has failed to apply for the Tax-payer's Identification Number (TIN). Bibliography 1.

The Income Tax Ordinance, 1984;

The Finance Act, 2018;

Mr. Ranjan Kumar Bhowmik FCMA, Commissioner of Taxes, National Board of Revenue

» About the Author Fellow Member of the Institute

(b) “ofﬁcial electronic mail of the sender” means the electronic mail designated by the Board to the income tax authority serving the notice; (c) “speciﬁed electronic mail address of the person” means the electronic mail address – (i)

that has been mentioned in the return of income of the person submitted for the respective income year;

April - June 2018 | 27

PERFORMANCE OF SECTION 186 OF THE COMPANIES ACT–1994 : APART OR HALF-PART? Bipul Kumar Bhowmik FCS

ection 186 requires the balance sheet of a holding company to include certain particulars of its subsidiaries. There shall be attached to every balance sheets of a holding company the balance sheets, proﬁt and loss accounts, reports of directors and auditors of the subsidiaries companies. There is also a provision to exempt the companies for non-attachment of balance sheet by way of obtaining government approval [sec. 186 (11)]. If the persons who are responsible for maintaining the books of accounts under section 181 do not prepare the books of accounts in the manner required by the law then they may be liable to a penalty as well as imprisonment for six months. A director is not liable however if the complainant does not prove that the company has no professional management such as managing director or manager and also that a particular director was connected with the default. This section is in the Companies Act 1994 and is aimed at presenting a whole picture of the group enterprise. Usually, a provision takes place in the statue speciﬁcally in the mother law when its incorporation is essentially needed in the context of circumstances either at present or near future. Stance of this provision in this Act is also like that but the reality is different. Its performance turns into a non-performing one due to its impossibility to comply. So, space occupied by this provision neither serves its neither purpose nor facilities any associate provision(s) within this Act to the fullest extent. In such a case, how we can make this provision a vibrant one by keeping its original sprit at par (not limited to letters only). Let’s have a look at in the following paragraphs. There are two types of subsidiaries - one company incorporated in Bangladesh and another is incorporated outside Bangladesh i.e. foreign subsidiaries. Subsidiary is nothing but a company holding shares more than 50.01%. It may be 51% or 60% or 70% and if it is 100% then it is called wholly/fully owned subsidiary. There are no foreign subsidiaries prior to 1994. Until 1994, the Section 186 can be complied fully in respect of Bangladesh subsidiary. As

28 | April - June 2018

far as companies incorporated in Bangladesh and become subsidiaries, prepare accounts as per the requirements of the Companies Act, 1994. They need to fully comply the same. There is no problem for preparation of accounts as per the Act. The problem for impossibility in that section is foreign subsidiary. By not complying the section for foreign subsidiaries, the Registrar of Joint Stock Companies (RJSC) intimidates the companies as to why the companies should be penalized? How impossibility will come? How you can insist that the balance sheet of the companies incorporated abroad be made out as per the requirements of Companies Act, 1994. This is here noted as impossibility. Clause (a) of sub Section 1 of Section 186 of the Companies Act, 1994 provides that there shall be attached to the balance sheet of a holding company having subsidiary or subsidiaries at the end of the financial year as at which the holding company’s balance sheet is made out, the following documents in respect of such subsidiary or each such subsidiary, as the case may be (a) a copy of the balance sheet of the subsidiary; (b) a copy of its profit and loss account; (c) a copy of the report of its Board of directors; (d) a copy of the report of its auditors; (e) a statement of the holding company's interest in the subsidiary as specified in sub-section (6); (f)

the statement referred to in sub-section (8), if any; and

(g) the report referred to in sub-section (9), if any. Sub section (2) of Section 186 of the Companies Act, 1994 provides that the balance sheet referred to in clause (a) of sub-section (1) shall be made out in accordance with the requirements of the Act. The requirements of the Act basically depicts that the ﬁnancials are to be prepared as per Bangladesh

ARTICLE Companies Act. The books of accounts are also to be certified by Bangladeshi chartered accountants. The procedural problems to encounter is notable here and you cannot simply attach the balance sheet of foreign subsidiary duly certified the professionals of foreign country/ Bangladeshi chartered accountant. The Schedule-XI is to be prepared in Bangladeshi taka not in foreign currency. Investments abroad as well as foreign direct investment by the government – both are considerable here with equal importance. There is only one category of subsidiary company i.e. companies incorporated in Bangladesh. Updating the Companies Act-1994 over the Companies Act-1913 was mostly incorporating provisions of Companies Acts prevailing in the subcontinent, so far applicable. Either initiative has taken for up-to-date changes or to introduce any new form of Companies Act, in the context of vision of Corporate Bangladesh. The Section was introduced in 1994 and the then law makers not visualized the foreign subsidiary at future date. In recent years, our economy has undergone a number of reforms, resulting in a more market-oriented economy. Particularly, after the Government of Bangladesh has taken steps towards linearization and globalization of the economy, the size of Bangladeshi Corporates is becoming bigger and accordingly the expectations of various stakeholders are also increasing, which can be satisfied only by the promulgation of new Companies Act (which is now at finalization stage as far as it is known to us) by following the incorporation of all kinds of relevant provisions in light of initiated series of economic reform process including attracting foreign direct investment and investing abroad and also have their subsidiaries abroad. The companies invested abroad and also made several subsidiaries both listed and unlisted entities also need to be focused accordingly. The RJSC understood the problem associate to Bangladeshi holding company to prepare subsidiary accounts as per requirements of the Companies Act, 1994. It is almost impossible to comply because neither we have local GAAP (i.e. well-organized/ well-shaped one) nor we can ignore the prescriptions (which are almost outdated) as provided by the Act. Moreover, the accounting procedure and accounting standards are entirely different to one country with another specifically in light of post-Enron collapse. When the accounts are prepared, Chartered Accountants want the books of accounts of the subsidiaries. The Section is impossible to comply but

the authorities are giving exemption, if you prepare consolidation of balance sheet, then exemption will be granted and the consolidation of balance sheet will also to be prepared as per the requirements of Companies Act, 1994. Moreover, listed entities by virtue of listing agreement as well as accounting standards with respect to depiction in SEC Rules, prepare consolidation but the section nowhere mentioned that exemption will be given provided if you prepare consolidation of balance sheet either consolidation for exemption for non-attachment or attachment simply ﬁlls up the accounts in Schedule XI. Keeping in view of the above, RJSC could issue notices to various corporate to adhere the subsidiary (incorporated abroad) requirements as per Section 186 of the Companies Act, 1994. When the corporate is not in a position to comply i.e., impossibility comes how can you penalize the corporate? So, breezing the requirements of government agencies in the context of cross-border investments by way of doing harmonization of provision of Act/Rules under the same umbrella (i.e. a competent authority) is now obviously inevitable. It is well said that provision of law loose its sense when it is apart or departed from its practical application. With the changing scenarios of overall economy of Bangladesh, we need to re-look the practical implication and application of provision(s) of the Companies Act (with special emphasis to section 186) to make it (or these) vibrant towards good governance and ensure proper and complete presentation of whole picture of the group enterprise. While enacting the new Companies Bill, the government should properly address the ﬁnancial reporting (i.e. accounting) standards and consider attachment of accounts prepared by foreign nations until the Act is enacted with amendments without insisting that the balance sheet to be prepared as per requirements of the act. So, in the present companies’ bill, BFRS/IFRS shall be included and the attachment of subsidiary is also to be addressed in light of the pre or post enactment of the statue. At present, the impossibility continues for non-performance this provision of the Act and we do strongly believe that right time initiative can turn non-performing provision into a performing one, will enable us to grow in line with the same pace and excel our utmost expectations with respect to compliance surging ahead.

» About the Author Fellow Member of the Institute

April - June 2018 | 29

PROS AND CONS OF THE NATIONAL BUDGET OF THE FY 2018-19 Mohammad Shahajahan FCS

bstract

Budget is a tool of estimating the expenditure for a fiscal year and determining the sources of financing to that estimated expenditure. Every year Finance Minister of the Government of the Peoples Republic of Bangladesh announces the national budget in the first week of June. The national budget of Bangladesh becomes giant in size and highly ambitious. In FY 2018-19, the total expenditure has been estimated at Tk. 4,64,573 crore which is 18.3% of GDP. It aims to build a happy, prosperous and caring Bangladesh and the title of the FY 2018-19 Budget termed as ‘Bangladesh on a Pathway to Prosperity’. This study aims to find out the potentials of the budget of FY 2018-19 to achieve the expected goals of the Government as well as constraints/ challenges in achieving that expected goals. The study found that the budget of FY 2018-19 is ambitious but it is implementable. Adequate and relevant sector priority for achieving Sustainable Development Goals/ Vision 2021/ Vision 2041 to accelerate the Bangladesh as developed country, discouraging the use of some harmful items (i.e. Bidi), reducing of duty on some raw materials of cellular phones to facilitate cell phone manufacturing, withdrew VAT and reducing of duty on some software which is not developed in Bangladesh, increasing of supplementary duty on some fashion items and decreasing the supplementary duty of leaf spring are some good proposal in the budget of FY 2018-19. The study also found challenges for better implementation of the budget of FY 2018-19 i.e. disappointment of general individual taxpayers as tax exemption slab has been proposed to remain unchanged though average inflation rate is 6% for the last four years, corporate tax reduction by 2.5% for banks and other financial institutions without any precondition for improving their corporate governance, imposition of VAT on pulp imported by commercial importer will increase the price of educational essentials, imposition of Regulatory Duty on some essential items will increase the cost of living of citizens, increase the tax burden on general people without considering the affordability, probability to decrease the

30 | April - June 2018

proposed budget reduction in the revised budget, dependency of the government for budget deficit financing will be increased on both external and domestic sources of financing. Timely and evenly spending of budget throughout the financial year rather than big portion of budget spending in the last quarter (April to June)of the FY is also another challenge to ensure economy, efficiency and effectiveness of implementation of the national budget of FY 2018-19. The study therefore, recommended implementing the budget of FY 2018-19 by considering these challenges for ensuring value for money and public interest. Introduction The national budget of Bangladesh has been expanding year to year with the expansion of the Gross Domestic Product (GDP) of the country since its independence in 1971. According to the International Monetary Fund, Bangladesh is now the 43rd largest economy of the world in terms of GDP and in terms of Purchasing Power Parity, Bangladesh stands at 32nd. The Government of Bangladesh set Vision 2021 to be developing country and following the Vision 2021, it set Vision 2041 to accelerate Bangladesh as developed country. With the long and enduring process, Bangladesh is stepping to achieve the goals by continuing its endeavours for building growth-inducing infrastructure like communication-power and energy and creating investment-friendly environment. Mr. Abul Maal Abdul Muhith, honourable Finance Minister of the Government of The Peoples Republic of Bangladesh announced the national budget for FY 2018-19 in the parliament in the first week of June with a view to achieve the prosperity of Bangladesh. The FY 2018-19 budget is giant in size with estimated expenditure of Tk.4,64,573 crore which is 18.3% of GDP. FY 2018-19 Budget at a Glance In FY 2018-19 Budget, estimated expenditure, revenue estimation and estimated budget deficit are presented in the following diagram:

ARTICLE Total Budget BDT (Crore) 500000 450000 400000 350000 300000 250000

464573

200000

Budget Deficit

339280

150000 100000

125293

50000

FY 2017-18 which is also highly ambitious. Government have to set mechanism to broaden the NBR Tax base but the affordability of the general people needs to be considered. The Non-NBR tax and Non Tax Revenue estimated in the budget of FY 2018-19 are also higher than the budget of FY 2017-18 by 35.06% and 22.38% respectively.

Estimated Budget Deﬁcit and its sources of ﬁnancing are presented in the following diagram:

0 Total Expenditure Estimated

Estimated Revenue Income

The total expenditure for FY 2018-19 estimated as Tk.4,64,573 crore which is 16.07% higher than the total estimated expenditure of the revised budget of FY 2017-18 which indicates the budget of FY 2018-19 is highly ambitious. The revenue income estimation in the budget of FY 2018-19 is Tk.3,39,280 crore which is 30.77% higher than the total revenue estimated in the revised budget of FY 2017-18. So the execution of the budget of FY 2018-19 needs more attention to achieve the revenue target. The estimated budget deficit in FY 2018-19 is Tk.1,25,293 crore which is 11.83% higher than the budget deficit estimated in the revised budget of FY 2017-18. So, the Government will need to borrow more than the budget of FY 2017-18 from external as well as domestic sources for deficit financing. Revenue Estimate

125293 54067

Total Budget Deﬁcit

External Sources

71226

Domestic Sources

The dependency of the Government for budget deficit financing will be increased on both external (development partners) and domestic (banking and non-banking channels) sources of financing. External sources of financing of budget deficit estimated as Tk.54,067 crore (43.15% of total estimated budget deficit of FY 2018-19) is 17.48% higher than of the external financing of budget deficit in the revised budget of FY 2017-18.

NBR Tax Non NBR Tax

Sector wise Allocation

Sources of Estimated Revenue Income BDT (Crore) 33352

296201

140000 120000 100000 80000 60000 40000 20000 0

Out of domestic borrowing of Tk.71,226 crore (56.85% of the total budget deﬁcit of the FY 2018-19), Tk.42,029 crore will be borrowed from domestic banking sources which was only Tk.19,917 crore in the revised budget of FY 1917-18. So this excessive borrowing (211% of domestic bank borrowing of the revised budget of FY 2017-18) from domestic banking sources need proper care of so that the probable crowding out effect of domestic borrowing can be managed effectively.

Sources of estimated revenue income are presented in the following diagram:

9727

Estimated Budget Deficit and Deficit Financing BDT (Crore)

Estimated Budget Deﬁcit

Non Tax Revenue

Sector wise allocation of the budget of FY 2018-19 is as under:

The NBR Tax revenue has been estimated as Tk.2,96,201 crore which is 31.64% higher than the NBR Tax revenue estimated in the revised budget of

April - June 2018 | 31

Human Resources Development (Education, Health and Others) 10.80% 26.90% 26.30% 14.30%

21.80%

Overall Agriculture (Agricultures, Rural Development and Rural Institutions, Water Resources and Others) Power and Energy Communications (Roads, Railways, Bridges and Others) Other Sectors

Sector wise allocation shows that the Human Resources Development (education, health and others) get 26.90% of the total budget of FY 2018-19 which is very much pertinent for the country context but need better implementation mechanism to ensure value for money. Communications (Roads, Railways, Bridges and others) accounts 26.30% of the total budget of 2018-19 which is important for building of mega structures to improve communications within the country for facilitating the business, commerce and employment generation. But it is necessary to establish sector implementation plan and priority so that the value for public money and sustainability of the works can be ensured. Overall Agriculture (Agricultures, Rural Development and Rural Institutions, Water Resources and others) gets 21.80% of the allocation of total budget of FY 2018-19. As our economy is agriculture based, this allocation is very much relevant to develop our agriculture sector for boosting up the economy of the country. But, special care should be taken for developing new agriculture technology, introducing the new technology to the marginal farmers, provide agricultural facilities (fertilizer, seeds, insecticides etc.)

to farmers directly, connecting market linkage to marginal farmers, suspension of middle men and muscle men in agriculture product market for ensuring farmers welfare as well as sustainability of this sector. Power and energy sector has been prioritised to improve power and energy generation. This sector has 14.30% allocation of the total budget of FY 2018-19. Other sectors share is 10.80% of the total budget of FY 2018-19. It is viewed that the sector priority has well prioritised in the budget of FY 2018-19 but the implementation challenges of giant budget remain constant. There is probability to decrease the proposed budget reduction in revised budget which is a common phenomenon in case of the national budget of Bangladesh. Timely and evenly spending throughout the ﬁnancial year rather than big portion of budget spending in the last quarter (April to June) of FY is also another challenge to ensure economy, efﬁciency and effectiveness of the implementation of the budget of FY 2018-19. Though the revenue collection target in the revised budget of FY 2017-18 was decreased by an average 9.34%, the proposed revenue collection target in the budget of FY 2018-19 was increased by an average 19.34% of the proposed budget of FY 2017-18. So, it is clear that the tax burden of the people of the country will be increased. Tax Rates Tax rates for taxpayers other than companies General individual taxpayers’ tax rates and tax exemption slab remain unchanged. General individual taxpayers expected that the tax exemption slab would be increased to at least Tk.3,00,000 as the average

Analysis of Revenue Collection Table-I : Revenue collection comparison between the budgets of FY 2017-18 and FY 2018-19

Income Tax and Other Direct Taxes Import and Export Duty Value Added Tax Supplementary Duty Excise Duty Turnover Tax Total

32 | April - June 2018

FY 2017 -18 Budget Proposed Revised Decreased in Revised Tk. in Crore Tk. in Crore % 87190 78000 10.54 27139 91717 40405 1729 10 248190

24830 83702 36882 1579 8 225001

8.51 8.74 8.72 8.68 20.00 9.34

FY 2018-19 Budget Proposed Increased in Proposed Tk. in Crore % 102201 17.22 32589 110543 48766 2091 11 296201

20.08 20.53 20.69 20.94 10.00 19.34

ARTICLE inﬂation was 6% over the last four years. Therefore, disappointment of the general individual taxpayers is not unlikely. Corporate Tax Rates Corporate tax rates have been proposed to remain unchanged in the proposed budget of FY 2018-19 except mentioned in the Table-II. Corporate tax rate for publicly traded Bank, Insurance and Financial Institution & Bank, Insurance, and Financial institutions approved by government in 2013 has been proposed to be decreased by 2.5%. But what beneﬁts from these organizations will enjoy the people or customers and investors from this corporate tax reduction are not clear. In this regard, government should instruct these organisations to improve their corporate governance so that the customers/ general people or investors can be ensured their deposits, investments and others services from these organisations.

only) of some software which is not developed in Bangladesh i.e. database software, and productivity software in any form to 5% will help digitalisation but new born IT business will strive to survive in the market. 3.

Withdrawn VAT 15% on ink for ball point pen imported by VAT registered ball point pen manufacturing industries may have favourable impact on educational essentials but imposition of VAT 15% on pulp imported by commercial importer will increase the price of educational essentials.

Imposition of Supplementary Duty 45% on things prepared from wool produced from Kashmiri Goat or other animals, 20% on hair clippers and hair-removing appliances will discourage the use of these products

Decrease in supplementary duty of leaf spring from 20% to 10% will improve at least the comport travelling within the country.

Imposition of Regulatory Duty on cereal ﬂours other than of wheat or meslin 10%, aluminium wire 10% and other aluminium wire 20% will increase the cost of living of citizens.

Fixation of Retail Price of Bidi The following changes have been proposed to ﬁx the retail price of Bidi to make Bangladesh a tobacco free country by 2041 shown in Table-III: Other Important Changes are proposed in the Budget of FY 2018-19 1.

To facilitate cell phone manufacturing, it have been proposed to reduce the duty (existing ranging 5% -25% reduced to ﬂat rate 1% mostly) on some raw materials of cellular phones which is good but it is needed to see whether this reduction will serve the interest of the end users of cell phones.

To expedite and expand IT and computer use, proposal to reduce import duty and elimination of VAT (CD 25% and VAT 15% reduced to CD 5%

Conclusion and Recommendation The budget of FY 2018-19 is giant in size and high ambitious as honourable Finance Minister Mr. Abul Maal Abdul Muhith also recognised in his speech. It has been proposed sectoral allocation very pertinently but the implementation of the budget of FY 2018-19 prerequisites proper sectoral and departmental planning to achieve the target within the stipulated time which ultimately ensure the value for money. The budget of FY 2018-19 may affect the livelihood of the general people as the tax burden would not be unlikely to increase.

Table-II Description

Existing Proposed Decrease

Publicly traded Bank, Insurance and Financial Institution & Bank, Insurance, and Financial institutions approved by government in 2013

40%

37.5%

2.5%

Table-III Description of Goods Handmade Bidi without use of machine (with ﬁlter)

Sticks

Existing retail

Proposed

(per packet)

price

retail price

10 sticks

Taka 6.00

Taka 7.50

20 sticks

Taka 12.00

Taka 15.00

April - June 2018 | 33

Adequate and relevant sector priority for achieving Sustainable Development Goals/ Vision 2021/ Vision 2041 to accelerate Bangladesh as developed country, discourage of the use of some harmful items (i.e. Bidi), reduce duty on some raw materials of cellular phones to facilitate cell phone manufacturing, withdrew VAT and reduce duty on some software which is not developed in Bangladesh, increase supplementary duty on some fashion items and decrease in supplementary duty of leaf spring are some good proposal in the budget of FY 2018-19. Some challenges for better implementation of the budget of FY 2018-19 need to be addressed i.e. disappointment of general individual taxpayers as tax exemption slab remain unchanged though an average inﬂation rate is 6% for the last four years, corporate tax reduction by 2.5% for banks and other ﬁnancial institutions without any precondition for improving their corporate governance, imposition of VAT on pulp imported by commercial importer will increase the price of educational essentials, imposition of Regulatory Duty on some essential items will increase the cost of living of citizens, increase the tax burden on general people without considering the affordability, probability to decrease the proposed budget reduction in the

34 | April - June 2018

revised budget, dependency of the government for budget deficit financing will be increased on both external and domestic sources of financing. Finally, timely and evenly spending throughout the financial year rather than big portion of budget spending in the last quarter of FY (April to June) is also another common challenge to ensure economy, efficiency and effectiveness of the implementation of the budget of FY 2018-19. The study, therefore, is being recommended implementing the budget of FY 2018-19 by considering these challenges for ensuring value for money and public interest. Sources 1.

‘Bangladesh on a Pathway to Prosperity’- Budget Speech of FY 2018-19 of the Finance Minister of the Government of The Peoples Republic of Bangladesh.

News and Articles published in The Daily Star.

» About the Author Fellow Member of the Institute

ARTICLE

GOOD GOVERNED CORPORATE WORLD FOR SUSTAINABLE DEVELOPMENT Md. Shiful Islam ACS

The whole world is passing around the era of Sustainable Development Goals, visionary new features of the world as well as the corporate entities doing its business in domestic or international perspectives. Why we are saying about these features the reason is that once one can identify his or her current status if we broadly say the demand or expectations of the stakeholders, it becomes easier for formulating a strategic and sustainable policy. Fernando Gonzalez Olivieri, CEO, CEMEX, Mexico in a statement said that“...businesses in the future - in order to be properly measured - should take into account all the impact they have on society, not just the ﬁnancial ones.” United Nations Ex. Secretary - General Ban Ki-moon, speaking at Global Economic Forum in Davos, Switzerland January 2016 stated that “Our planet and its people are suffering too much. This year has to be the moment for turning global promises into reality. Governments must take the lead with decisive steps. At the same time, businesses can provide essential solutions and resources that put our world on a more sustainable path.” These statements clearly depict a picture of the future business world particularly the ethical and responsible behavior of corporate at the same time the eco-friendly industrialization, the society expect from. The effort to see the future business differently with broader perspective in line with the knowing of context-the worlds around the organizations has been further clinched up by the latest IFC publication. ‘Beyond the Balance Sheet: IFC Toolkit for Disclosure and Transparency’ is an IFC public knowledge leadership publication. It supports IFC’s broader effort to enhance disclosure and transparency in the countries and companies it works with. IFC’s new Disclosure and Transparency Toolkit is designed to meet investors’ need for better information-the most recent addition to its suite of innovative tools that are designed to unlock private sector investment. The toolkit does this by offering concrete step-by-step guidance that helps companies customize their disclosure of strategic, governance, and performance information in a progressive way- depending on size, organizational

complexity, and operational context-while ensuring that the information is thorough and reliable. By using the toolkit, companies can develop an integrated and comprehensive annual report, combining relevant material environmental, social, and governance (ESG) information. The above mentioned statements are very crucial for all the stakeholders of corporate worlds particularly the policy making authority. Because in all our future plans we should keep in mind all the changing scenarios both in local and international. The proposed companies act of Bangladesh should reflect sufficient provisions to promote good corporate governance and the practice of ethical and sustainable business among other important issues. Corporate governance essentially involves balancing the interests of a company's many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community. Since corporate governance also provides the framework for attaining a company's objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure. In this regard, the companies act of our neighboring countries (Companies Act, 2013 of India and Companies Act 2017 of Pakistan) might give some ideas being the latest ones in its kind. Companies act of neighboring countries kept provision related to the practice of corporate governance along with the introduction of one-man company. Only the practice of corporate governance can make the company liable to keep hands with sustainable development goals side by side the identification of one’s responsibility towards the achievement of these world recognized goals. According to Brundtland Report, sustainable development is "the one that satisfies the needs of the present without jeopardizing the ability of future generations to meet their needs. The concept of sustainable development is built on the three most important aspects in the life of every society economic development, social equity and environmental protection. In the context of sustainable development,

April - June 2018 | 35

these fundamental aspects are called "pillars". This definition as well as its main principles allows making the conclusion that the main characteristic of the sustainable development is to achieve development of the society and its economic life in harmony with nature sustainable development and corporate governance. A developing country like Bangladesh should come up with seriousness and should engage every corner of the society to implement the sustainable development goals and it should try to score better in performance measure. Sustainable development in the field of environment is often related to waste reduction, pollution reduction, energy efficiency, reduce the air emissions, reduce the consumption of hazardous/toxic materials, reduce the frequency of environmental accidents etc. Gimenez, Sierra, Rodon, 2012). Sustainable development in its social element shifts the focus to internal communities (for example the employees) and the society (Pullman et al, 2009). Social sustainability means that companies (and manufacturing plants) provide equal opportunities, foster diversity, encourage social contacts within and outside the company and guarantee the quality of life of its employees. A good corporate governance regime is central to the efficient use of capital. First, it promotes market confidence; helps to attract additional long-term capital, both domestic and foreign; and fosters market discipline through appropriate disclosure and transparency. Second, good corporate governance helps to ensure that corporations take into account the interests of a wide range of constituencies, particularly when the board recognizes that corporate social responsibility can mutually benefit the company and its operating environment. Those actions, in turn, help to ensure that corporations operate for the benefit of society as a whole, and induce stable business development and growth, lower risk, and sustainability. Therefore, we expect the proposed companies act will render sufficient provisions to promote corporate governance vis-a-vis the sustainable development of the country. With a view to ensure better corporate world companies act should engage all the professional bodies of the country to play the extended due role as vested by the statue of the country. In line with other counties, chartered secretary profession i.e. Institute of Chartered Secretaries of Bangladesh

36 | April - June 2018

should be taken into strategic engagement to promote the corporate governance of Bangladesh. Secretarial standards of ICSB should have ﬁrm recognition with broader scope of application. Another step towards promotion of corporate governance should be the commencement of secretarial audit. Provision also should be kept to ensure a mandatory appointment of company secretary at least for the company enjoying a particular level of turnover or capital as we know the role of company secretary ensures that an organization complies with relevant legislation and regulation, and keeps board members informed of their legal responsibilities. The government of Bangladesh also should emphasize the necessity of the good governance and established transparency and fairness in operation process of public and private enterprises. Doing so we should consistently take into consideration some issues namely the changing business scenarios in global perspectives, expectations of the stakeholders, the effect to environment and aligning with the goals and targets as set in sustainable development. Source a.

http://www.iisd.org

http://www.worldbank.org/

https://www.ifc.org

www.oecd.org

» About the Author Associate Member of the Institute

ARTICLE

THE IMPORTANCE OF COMPANY LAW IN ECONOMIC DEVELOPMENT Prof Dr Feroz I. Faruque FCS, FCCE

“Legal System>>Financial Development>>Economic Growth Conversely Company law Delay>> Delay the Economy>> Delay the National Progress which is like Justice Delayed Justice Denied”

iscussing company law nowadays, it is difficult not to face some kind of economic arguments. What is interesting is that these arguments are of United States origin, developed in their legal and political environment and not easily implemented to the European legal, economic and political context. The most important economic theory in company law is the agency theory that is an implication of the theory of the firm developed from the beginning of the 1970's in the United States. One of the most important implications of agency theory is what is called the "shareholder primacy". According to the view, the sole or at least the primary fiduciary duty of company directors is and should be the maximization of the company value to the shareholders, as the residual "owners" of the company. Taking specifically into consideration the interests of other company stakeholders, i.e. contractual parties like different kind of creditors, suppliers, employees and local communities, is seen as detrimental to the well-being of the company. On the other hand, maximizing the shareholder value will automatically lead to decisions that enhance the interests of other stakeholders. As company law is highly econo-political, the company being the most important private legal vehicle to gather capital, generate profits and redistribute income in the country, this econo-political aspect of agency theory cannot be underestimated as it is in contrast with the traditional Continental company law thinking. Historically, the main difference between US and Continental company law rises from the difference between American liberalism based on economic efficiency and European social-democracy based on idea of equality, even in the cost of reduced efficiency. This dichotomy has dictated how the roles of controlling and minority shareholders, directors and other constituencies, especially employees, are set in the company law game. The hard core of this political nature of company law is in the discussion on company

objective, is it the interest of the shareholders solely or does the company has a wider social purpose. During the latest financial crisis, the way companies were governed has brought into focus how we see the companies role in society and has the shareholder-based thinking a role in the problems we have faced. The purpose of this article is to analyze the role of the US-based economic thinking in the evolution of European company law and the consequences of this evolution and possible solutions to the problems it has caused. On more general level, the political role of economics in company law theory and law-making is analyzed. In its strongest view, shareholders value maximization as a corporate purpose is not a debatable ethical or political question, but an economic fact, “the best of all available alternatives”. The agency theory of the firm was developed as an American econo-political theory, manifested most clearly in Frank Easterbrook’s and Daniel Fischel’s book ‘The Economic Structure of Corporate Law’ Company Law was initiated with Act 43 of 1850, which was based on the English Companies Act of 1844, making it possible, for the first time, to incorporate and register a company without obtaining a royal charter. Under the Indian Act, the supreme courts in the presidency towns of Kolkata, Mumbai and Chennai were authorized to order the registration of unincorporated companies of partners associated under a deed containing a provision that the shares were transferable. The privilege of limited liability was not conferred upon by this Act, although a company was permitted to sue and be sued in its registered name. In 1857, an act for the incorporation and regulation of joint stock companies and other associations either with or without limited liability of the members thereof

April - June 2018 | 37

was passed. But under this Act the privilege of limited liability was not extended to a company formed for the purpose of banking or insurance. This disability was removed by the Act of 1860, based on the English Companies Act of 1857. Then, following the English Companies Act of 1862, a comprehensive act was passed in India in 1866 for consolidating and amending the laws relating to the incorporation, regulation and winding up of trading companies and other associations. Between 1866 and 1913, various amendments in the Indian law were made following similar changes in England. The law relating to companies was re-enacted in a comprehensive form in the Companies Act of 1913. This Act was principally based on the English Companies (Consolidation) Act of 1908. Between 1908 and 1936, small amendments were made in the Act of 1913. The Indian Companies (Amendment) Act, 1936 introduced important provisions in the Act of 1913 in the light of the English Companies Act, 1929. This Amendment Act of 1936 also recognized for the ďŹ rst time the system of managing agencies in the subcontinent. After the partition of India (1947), India passed a new comprehensive Act in 1956, based primarily on the English Companies Act, 1948 and the suggestions made in the Bhava Company Law Committee Report. During the Pakistan period a Company Law Commission was set up and it suggested amendments in 1962 in the light of the English and Indian amendments, and subsequently some amendments were made. The Securities and Exchange Ordinance, 1969 was the most important piece of legislation incorporating corporate activities during this period. It supplemented the Capital Issues (Continuance of Control) Act of 1947, giving extensive powers to the controller of capital issues. After the emergence of Bangladesh a Company Law Reforms Committee was set up in 1979, comprising leading government servants, chartered accountants and lawyers. The committee made many recommendations for changes in company law but not until 1994 was a new comprehensive act passed by Jatiya Sangsad. The Securities and Exchange Commission Act of 1993 created the Securities and Exchange Commission which oversees the issue of capital. Its primary purpose is to protect the investing public in corporate investments. It has been given extensive powers to make rules and regulations. Its responsibilities include those of the Controller of Capital Issues under the Acts of 1947 and 1969. If we see the chronological status of Company law it is moving as a snail pace where we can see business is

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dynamic but company law is static, which rather pulling the business back and hence economy is also being pulled back. The essential elements of company law are the concepts of the company as a separate legal entity, irrespective of the closeness of the shareholders, investors protection, management of a company and the modes of winding up, and accounts and securities trading. After that a revised one was made in 1994 directly copying 56 clauses from the Indian Companies Act. To our utter surprise a revision was initiated in 2013 having a committee of too highly qualiďŹ ed members but having too little delivery-could not deliver the complete document till to-date. The Committee members had too frequent quarrels over the issue than they could deliver anything realistic. In the mean time two committee members left for eternity. Business Law and Corporate Law While corporate law focuses on legal aspects governing sale and distribution of goods, business law covers legal aspects used in acquisitions, mergers, formation of companies and rights of shareholders. Companies need people who have in-depth knowledge of both the laws. Businesses Follow the Law. It's important for business owners, managers, and other professionals to have a basic understanding of business law to help them make better decisions. Throughout a business' existence, it can do most things that a person can do, and we need laws to control those activities. Corporate law (also known as business law or enterprise law or sometimes company law) is the body of law governing the rights, relations, and conduct of persons, companies, organizations and businesses. It refers to the legal practice relating to, or the theory of corporations. Corporate law often describes the law relating to matters which derive directly from the life-cycle of a corporation. It thus encompasses the formation, funding, governance, and death of a corporation. While the minute nature of corporate governance as personiďŹ ed by share ownership, capital market, and business culture rules differ, similar legal characteristics and legal problems exist across many jurisdictions. Corporate law regulates how corporations, investors, shareholders, directors, employees, creditors, and other stakeholders such as consumers, the community, and the environment interact with one another. Whilst the term company or business law is colloquially used interchangeably with corporate law, business law often refers to wider concepts of commercial law, that is, the law relating to

ARTICLE commercial or business related activities. In some cases, this may include matters relating to corporate governance or financial law. When used as a substitute for corporate law, business law means the law relating to the business corporation (or business enterprises), i.e. capital raising (through equity or debt), company formation, registration, etc. A corporation may accurately be called a company; however, a company should not necessarily be called a corporation, which has distinct characteristics. In the United States, a company may or may not be a separate legal entity, and is often used synonymous with "firm" or "business." According to Black's Law Dictionary, in America a company means "a corporation or, less commonly, an association, partnership or union that carries on industrial enterprise. Other types of business associations can include partnerships (governed by the Partnership Act 1890), or trusts (Such as a pension fund), or companies limited by guarantee (like some community organizations or charities). Corporate law deals with companies that are incorporated or registered under the corporate or company law of a sovereign state or their sub-national states. The defining feature of a corporation is its legal independence from the shareholders that own it. Under corporate law, corporations of all sizes have separate legal personality, with limited or unlimited liability for its shareholders. Shareholders control the company through a board of directors which, in turn, typically delegates control of the corporation's day-to-day operations to a full-time executive. Shareholders' losses, in the event of liquidation, are limited to their stake in the corporation, and they are not liable for any remaining debts owed to the corporation's creditors. This rule is called limited liability, and it is why the names of corporations end with "Ltd.". or some variant such as "Inc." or "plc").

that shareholders (and employees) elect a "supervisory board", and then the supervisory board chooses the "management board". There is the option to use two tiers in France, and in the new European Companies (Societas Europaea). Recent literature, especially from the United States, has begun to discuss corporate governance in the terms of management science. While post-war discourse centered on how to achieve effective "corporate democracy" for shareholders or other stakeholders, many scholars have shifted to discussing the law in terms of principal–agent problems. On this view, the basic issue of corporate law is that when a "principal" party delegates his property (usually the shareholder's capital, but also the employee's labor) into the control of an "agent" (i.e. the director of the company) there is the possibility that the agent will act in his own interests, be "opportunistic", rather than fulﬁll the wishes of the principal. Reducing the risks of this opportunism, or the "agency cost" is said to be central to the goal of corporate law. Last but not least Company law must be revised in every ﬁve years as the business is more dynamic now than before and a clause must be in the new company law to this effect for following this religiously/compulsorily. References •

John Armor, Henry Hansmann, Reinier Kraakman, Mariana Pargendler "What is Corporate Law?" in The Anatomy of Corporate Law: A Comparative and Functional Approach(Eds Reinier Kraakman, John Armor, Paul Davies, Luca Enriques, Henry Hansmann, Gerard Hertig, Klaus Hopt, Hideki Kanda, Mariana Pargendler, Wolf-Georg Ringe, and Edward Rock, Oxford University Press 2017)1.1

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RC Clark, Corporate Law (Aspen 1986) 2; H Hansmann et al, Anatomy of Corporate Law (2004) ch 1 set out similar criteria, and in addition state modern companies involve shareholder ownership.

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Black's Law Dictionary, 8th edition (2004), ISBN 0-314-15199-0 e.g. South African Constitution Art.8, especially Art.(4)

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Phillip I. Blumberg, The Multinational Challenge to Corporation Law: The Search for a New Corporate Personality, (1993) .

Corporate Governance Corporate governance is primarily the study of the power relations among a corporation's senior executives, its board of directors and those who elect them (shareholders in the "general meeting" and employees). It also concerns other stakeholders, such as creditors, consumers, the environment and the community at large. One of the main differences between different countries in the internal form of companies is between a two-tier and a one tier board. The United Kingdom, the United States, and most Commonwealth countries have single uniﬁed boards of directors. In Germany, companies have two tiers, so

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