The government is pondering more reduction in corporate tax rates levied on businesses for the third time in a row in the upcoming national budget.
Currently, listed companies are levied corporate tax at 22.5% while unlisted companies are supposed to pay the tax at 30%.
An official at the National Board of Revenue (NBR), requesting anonymity, said that a 2.5% corporate tax cut for both listed and unlisted companies has been proposed in the upcoming budget proposal.
If implemented, listed companies will have to pay corporate tax at the rate of 20% while unlisted companies will be taxed at 27.5%.
Although there is a high risk of a sharp drop in revenue collection if corporate tax rates are reduced, considering the current economic climate, this strategy has nonetheless been adopted to attract local or foreign direct investment, said the official.
If parliament approves the proposal, businesses in Bangladesh are going to experience such a reduction for the third consecutive fiscal year, as each time in the previous two fiscals, the NBR cut 2.5% in corporate taxes rates.
According to the existing corporate tax structure, the corporate tax rate on listed banks and insurance companies is 36.50% and while unlisted banks insurance companies are taxed at 40%.
Merchant banks pay corporate taxes at 36.50%.
In addition, companies that produce commodities harmful to human health- like cigarettes, bidis, chewing tobacco and other tobacco products- are levied a tax rate of a maximum of 45%.
Listed mobile phone operators pay taxes at 40% while unlisted operators are charged at 45%.
Cooperative societies and private universities and medical colleges are levied a 12% tax.
Environment-friendly and compliant ready-made garments companies are charged 10% tax while general ones are levied at 12%.
Textile companies pay corporate tax at 15%.
Top businesses hailed the decision of cutting corporate taxes more, but they still pointed out that even after the reduction, the rate remains highest in South Asia.
In this fiscal, however, businessmen have put another kind of tax on their crosshairs.
Leading businesses have long been vocal against the advance tax and advance income tax rates, claiming it hinders the local industries to flourish and makes Bangladesh a less attractive location for foreign direct investments.
The advance tax and advance income tax is a type of tax levied on goods imported for commercial purposes only. It was introduced in 2006 to bring unregistered importers under the tax net.
Md Jashim Uddin, president of FBCCI, the country's premier association for businesses, said they would rather prefer a complete withdrawal of advance income taxes, instead of a mere reduction of corporate tax rates.
"We applaud the decision to reduce corporate taxes. But for us, advance income tax has become a pertinent issue," he also said.
"The NBR collects revenue in the name of advance tax and advance income tax, which they are supposed to adjust later while we submit tax returns. That rarely happens. We [businesses] find such management troublesome," the FBCCI president added.
