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Dhaka Tribune

Several tax benefits on the cards

Update : 03 Jun 2018, 10:25 PM

The incumbent government plans to prepare the next budget with some structural changes in the revenue collection process, offering a number of tax benefits to both individual and corporate taxpayers, according to Finance Ministry sources.

They added there will be tax cuts for the corporate sector to encourage private sector investment in the upcoming budget for fiscal year 2018-19, while the tax free income ceiling for individual taxpayers will also be extended.

According to sources, forthcoming fiscal year budget will likely reach Tk4,68,200 crore, which would be 16% more than the outgoing fiscal year budget of  Tk4,00,266 crore in 2017-18. 

Finance Minister AMA Muhith is scheduled to place the budget beforeparliament on June 7 this year.

Meanwhile, sources at the National Board of Revenue (NBR) said the government has planned to set a Tk2,96,000 crore tax collection target for the revenue realization agency, which is about 30% higher than the revised collection target of Tk2,25,000 crore for the current fiscal year.

Of the target, the NBR would have to collect around Tk1,10,000 crore in value-added tax (VAT), Tk 1,00,200 crore in income tax, while the rest would be collected from customs duty and other sources, said several NBR officials.

Tax benefits

Finance Ministry officials involved with the budget preparation said that in a bid to boost stagnant private investment, the government plans to reduce corporate tax rates and avoid t double taxation on subsidies from the upcoming fiscal year.

Besides, there will be no taxation on any new sectors, they said.

The reduction of the corporate tax rate has been a long standing demand of the business community in Bangladesh. Different trade bodies, including the FBCCI, DCCI, and others, have demanded on numerous occasions that the corporate tax rate for the next fiscal year be reduced.

Presently, the tax rate for publicly traded companies is 25%, for non-publicly traded companies it is 35%. For publicly traded banks, insurance and financial institutions (other than merchant banks), newly established banks, and insurance and financial institutions approved by the government in 2013, the rate is 40%. 

For non-publicly traded banks, insurance, and financial institutions, the tax rate is 42.5%, and for merchant banks, it is 37.5%.

The tax rate is 45% for companies that produce tobacco products such as cigarettes and chewing tobacco, for publicly traded mobile phone companies it is 40%, and for non-publicly traded mobile phone companies it is 45%. The tax rate on dividend income is 20%.

The finance minister in his budget speech last year said a limited number of sectors, including non-listed banks, non-listed mobile phone operators, and cigarette manufacturing companies, were paying taxes at rates more than 40%.”

“We have plans to gradually bring the rate down to 40% for these sectors in the future,” he had said.

Finance Minister AMA Muhith, in a pre-budget meeting with the Economic Reporters’ Forum (ERF) on May 19, hinted that the corporate tax rate will be reduced with the next fiscal year.

According to NBR sources, the government may reduce the number of corporate tax categories and reduce taxes by 1 or 2 percentage points from the upcoming fiscal year, while tax benefits for establishing factories in special economic zones would also be increased.

The Finance Minister at the same meeting with the ERF also hinted at increasing the tax-free income ceiling.

Finance Ministry sources said the government has decided to increase the income free ceiling for individual taxpayers, considering the rising inflation.

Currently, the tax free ceiling for individual incomes between Tk2.5 lakh to Tk 4 lakh is calculated at a 10% rate, 15% for the next Tk5 lakh, 20% for the next Tk6 lakh, 25% for the next Tk3 lakh, and 30% tax on additional income beyond that.

There would be no taxes for individual taxpayers earning Tk2.70 lakh or Tk3 lakh in the next budget, from the existing tax free status of incomes not exceeding Tk2.5 lakh, according to NBR sources.

The tax free ceiling for women and people above the age of 65-year will be increased to Tk3.25 lakh from the existing Tk3 lakh, while the tax free ceilings for taxpayers with disabilities and injured freedom fighters will remain the same– Tk4 lakh and Tk4.25 lakh respectively, they informed the Dhaka Tribune.

Raising the tax-free income ceiling might affect revenue collection, though the government plans to offset the potential revenue loss   by expanding the tax net, according to sources at the Finance Ministry and the NBR.

NBR chairman, Md Mosharraf Hossain Bhuiyan, also said at a recent meeting, that the revenue collecting authority of the government wants to expand the tax base by adding morebonafide taxpayers on the books. 

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