Tax net expansion vital to rise tax-GDP ratio

The government needs to take more steps to expand the tax net since it is essential to improve the tax-GDP ratio, say experts.

For certain types of companies, conditional reduction of tax rate, field of tax deducted at source and proposed rate change are good initiatives proposed in the national budget for the 2022-23 financial year, they said. According to the experts, the introduction of a 12 per cent tax rate for other general industries exporting goods and services and 10 per cent for the green industry will encourage diversification of exports of goods and services.

Their opinions came at a webinar, titled “Salient Features of Finance Bill 2022-2023,” organized by the Institute of Chartered Accountants of Bangladesh (ICAB) on Thursday, said a press release.

Dr Abdul Mannan Shikder, member (Customs Audit, Modernization and International Trade), and Md Mahmudur Rahman, member (Taxes Legal and Enforcement), of the National Board of Revenue (NBR) were among the panellists. ICAB President Md Shahadat Hossain delivered the welcome address while former ICAB president and Council Member Md Humayun Kabir moderated the session.

ICAB Council Member MBM Lutful Hadee, also the proprietor of Hadee Lutful & Co, Chartered Accountants, and Snehasish Barua, partner at Snehasish Mahmud & Co, Chartered Accountants, jointly presented the keynote paper. Addressing the webinar, Shahadat said that Bangladesh is targeting an average inflation rate of 5.6 per cent in the coming fiscal year.

That is challenging but encouraging too as it is not only depending on the fiscal policy or monetary policy but also depending on few external elements and influences like rising oil prices, depreciation of the taka against the US dollar, the disruption of the global supply chain and the Russia-Ukraine crisis, he added.

Snehasish said that 20 per cent tax rate has been proposed for listed entities with more than 10 per cent paid up capital through IPO, which is 22.5 per cent in current fiscal year. He said the companies can avail the rate upon condition that all investment and expenditure in excess of 12 lakh should be made through a banking channel. But the companies below 10 per cent paid up capital, the proposed rate is 22.5 per cent on condition that all receipts should be made through a banking channel.

On the same conditions for other than public companies the tax rate is 27.5 per cent, down from 30 per cent, and one person company tax rate is 22.5 per cent, down from 25 per cent, in the current fiscal year have been proposed, he said.

Snehasish in the keynote paper also described the various sections of proposed Finance Bill 2022.

He said that 10 per cent uniform tax rate has been proposed for all export oriented companies; RMG and other than RGM up to June 30, 2028. At the same time to motivate backward industries of RMG sector, on a few conditions the tax rate on business income for textile industries has been reduced to 15 per cent for the period of June 30, 2025. Personal investment tax rebate is made 20 per cent of individual income that falls under tax slab but the middle income people will not get proper benefit from it, he opined.

For all types of exports, tax rate collection has been increased by 1 per cent, which is unfavourable for exporters and will reduce export earnings, Snehasish said.The TDS rates have been raised in areas of minimum tax, hence, the reduction in corporate tax rates will have less impact, he added.

During the webinar, Lutful also shared his insights regarding the amendments proposed by the Finance Bill and the changes brought in through SROs and orders, including amendments in the Value Added Tax and Supplementary Duty Act of 2012 and Value Added Tax and Supplementary Duty Rules of 2016, general and special orders and the Customs Act of 1969.