With a reduction of income of a large section of the population after the shock from Covid-19, as well as the rising commodity prices, economists are suggesting to move away from the culture of increasing taxes for the poor and to put pressure on the rich instead.
NBR sources informed that on Wednesday, officials sat with several top organizations working on the country's economy.
In addition to the discussions, the organizations also gave their written proposals.
The National Board of Revenue (NBR) recently invited the Bangladesh Economic Association (BEA), the Policy Research Institute of Bangladesh (PRI), the Bangladesh Institute of Development Studies (BIDS), the Centre for Policy Dialogue (CPD), and PricewaterhouseCoopers (PwC) Bangladesh at a pre-budget discussion.
Regarding the meeting with NBR, Muntaseer Kamal, senior research associate at CPD, told Dhaka Tribune: “We (the organizations) had a discussion with NBR, where we made our proposals on VAT, after which everyone's proposals were discussed collectively.”
Asked about CPD's proposal, he said the tax system cannot work if it is only for financial reasons.
“Tax and VAT need to be set keeping in mind the rising inflationary pressures on the people. Therefore, it is important to reduce the import and local level VAT tax on daily commodities. At the same time, it has been suggested to consider raising the minimum income tax limit from Tk3 lakh to Tk3.5 lakh. At the same time, there is a 5% income tax for the next Tk1 lakh. The CPD has suggested raising that limit for the next Tk3 lakh,” Kamal explained.
“There is a 5% VAT on English medium school fees, which is not fair,” he also said.
CPD also argued that reducing the highest tax rate (from 30% to 25%) was against the cause of promoting tax justice.
“The highest tax rate should be reinstated at 30% for top earners in the FY2023 budget,” the economist said.
“We also suggested that the tax on cigarettes should be fixed on the basis of the stick instead of on the basis of price or slabs. Tk100 can be levied on every 10-stick packet. At present, tax is being collected in four slabs,” he explained.
CPD also suggested extending the VAT exemption facility at import, manufacturing and trading stages and also tariff exemption on Covid-19 test kits, PPE and vaccines in FY23.
Ahsan H Mansur, executive director of PRI, told Dhaka Tribune: “At present, the corporate tax rate of the country is higher than that of the competing countries. Competitiveness will not increase unless corporate taxes are reduced.”
He further said that Bangladesh will soon be removed from the list of Least Developed Countries (LDCs).
“It will not have many opportunities for export. At that time many sectors have to be sustained with tax benefits. We have to prepare now to face that challenge and the tax collection system needs to be automated,” he noted.
BEA General Secretary Professor Aynul Islam suggested introducing a transaction tax on the turnover of the pharmaceutical industry and introducing a renewal fee for the industry.
The BEA suggested the introduction of a wealth tax on the elite class of people to ensure an equal distribution of economy among all classes of the people in the society.
They also stressed raising the holding tax rate in the city corporation areas.
Meanwhile, PwC suggested that the NBR should update the e-TIN application system to allow foreign companies and citizens to apply for e-TIN without the mandatory requirement of the work permit registration number.
PWC also sought a clarification of section 18 of the income tax ordinance to properly measure the taxability of sales of goods by electronic means to purchasers in the country as the transaction by e-commerce has gradually increased.
It also suggested introducing the advance ruling mechanism so that non-residents can obtain advance ruling without any question or any kind of transaction. They also recommended introducing a provision for the issuance of tax residency certificates.
In their proposal, PWC said that the tax was being levied at the rate of 43.7% from international consulting firms. As a result, international consulting firms are not encouraged to come to Bangladesh. So, this tax needs to be reduced, it said.