Dr. Sikder Md. Anowarul Islam
Bangladesh government has been emphasizing to increase revenue from income tax to reduce distortion and increasing income distribution. The constitution of Bangladesh also emphasized to reduce inequality and accordingly improve equity. Bangladesh government has various programs of improving medical benefits to the poor segments. But government service for medical opportunities is rationing by the overfull demand and accordingly the service is controlled by the corruption and underground economy, especially in public sector management. While private medical service is expensive and out of the control of the low and middle income people. But the cost of medical expenses is equal for rich and poor while they suffer of any severe diseases, say, and kidney transformation in any hospital. Mortality rate of Bangladesh has been improved by substantial level but still the poor segment is ignored by the policy management.
Case (Income Tax on Medical Benefit):
Mr. Urman is a private university staff. His basic is Tk. 300,000. As per income tax provision Mr.Urman can get privilege of 10% of his basic as waiver of his income tax. Hence, he will get Tk.30, 000 as exemption from his income tax. But his salary statement shows that the university providing him Tk. 60,000 as medical benefit. Unfortunately, Mr. Urman has to pay 10% income tax on his extra income of Tk. 30,000 as per income tax provision of Bangladesh. Same as, Mr. Emran is a factory manager of a garments industry. His basic pay of salary is Tk. 1,200,000. His factory pays his medical benefit of Tk.120, 000. As per income tax provision, he has to pay 10% of his basic salary of Tk. 120,000. His factory shows in his salary statement that his pay of medical benefit is Tk.120, 000. Fortunately, he will get exemption of the total medical benefit of 10% amounting to Tk. 120,000 as a whole due discrimination of income tax system in Bangladesh.
Why this model of discriminatory income tax system?
Medical benefit of income tax provision as per income tax ordinance: a person has to get exemption 10% of his basis salary, or Tk.120, 000 which is less….rest will be payable as income tax. Say, Medical benefit on income tax system: Mt <Tk.120,000… 0r… Mt>Tk. 120,000, where Mt= 10% fixed tax exemption on basic salary as a medical benefit. Rest amount will be taxable income up to Tk.120, 000 and above.
Economic Consequences of Discrimination in Medical Income: When in a tax system poor and average income people pay more in medical income than rich, it will cause declining trend in private investment in medical sector if the public investment fixed in any country. We have no equitable health insurance system in national level. If every person is insured by health insurance system as per national provision, there will be a positive advantage for rich and poor of a country. At the same time, every poor people can get benefit to avail standard private sector medical service since the health insurance is insured the medical expenses. At the same time, public sector can boost or disappear in the medical system if they fail to mobilize the efficient service. The corruption will disappear due to efficient policy management.
Conclusion: Bangladesh is such a country got independence by liberation war in 1971. The war was organized due to equity and justice of income distribution. But this goal is yet achieved due to negligence of tax system in Bangladesh. If our tax policy makes rich more rich… and poor more poor than our constitutional right and justice will be ignored. We need endogenous policy to achieve equity and justice soon.