The International Monetary Fund (IMF) has recommended raising the tax-free income threshold to Tk 5 lakh from the existing Tk 3.5 lakh for FY25, along with abolishing tax exemptions on employment allowances, benefits other than the basic salary, and investments for individuals.
It also recommended abolishing the lower 5 per cent income tax and setting a minimum income tax at 10 per cent between Tk 5 lakh and Tk 8 lakh bracket.
The IMF technical mission team consisting David Baar, Arbind Modi and David made these recommendations to the National Board of Revenue (NBR) in a wrap-up presentation as the team presented its preliminary findings on the existing tax policy, administration and expenditure at the NBR head office in the capital on Thursday.
NBR chairman Abu Hena Md Rahmatul Muneem, income tax policy member, first secretary, second secretary and tax expenditure team attended the presentation.
The IMF team pointed out, “2025 Finance Act should recalibrate personal income tax slabs while repealing allowances and deductions, reducing employment and investment allowances.”
It proposed elimination of exclusions from income instruments, such as passive investment income from various bonds, zero coupon bond, and foreign income.
The agency also says to reduce the scope of the general tax rebate for investments in life insurances, government securities, mutual funds, ETFs, and publicly listed securities.
It proposes also to abolish the general employment income deduction of Tk 450,000 or one-third of employment income (whichever is less), and the exemption for allowances paid to government employees.
Evaluate now, rationalise in 2026, 2027
The IMF recommended that the NBR evaluate the existing tax relief and their contribution to the economy. If the government does not provide support, then these measures could be rationalised in 2026 or 2027.
It says to evaluate depreciation allowance rates and allowances to ensure that cost recovery for investment in durable assets is accelerated, and consider allowing business losses to be carried forward for at least ten years.
The IMF spoke in favour of evaluating reliefs that had been provided, and introducing legislative amendments to implement those that remain relevant, effective, economically efficient, and equitable as well.
Abolish exemption for pension
The IMF proposed the government to abolish exemptions for pension received from government and pension funds, and abolish exemption of Tk 25 million in respect of gratuity received from the government.
It also recommends migration to electronic filing and payment digitally to improve tax data for better administration and policy analysis.
The IMF says that all large corporations must be required to file and pay tax returns electronically.
Any corporate taxpayers that receive tax incentives must electronically file and pay tax returns. Otherwise they should be barred from claiming tax benefits such as exclusion, lower rate, tax holiday.
Replying to the IMF feedback, the tax administration gives assurance to the global lender to complete all the procedures to operate corporate tax return submission digitally within June this year, and it will be functionalised from July.
Conditions key to getting tranche
In a bid to get the third tranche of a $4.7 billion loan from the IMF, the government of Bangladesh should take these policy measures by June this year in line with the global lender’s recommendations.
NBR officials say the IMF did not want to disburse the second tranche of the loan, but we assured them of taking every measure to boost revenue. However, the IMF team is not satisfied as yet.
The IMF posed questions to the NBR for providing such massive exemptions in every layer for individuals, businesses, industries and so on. It asked how the country will increase revenue?
Moreover, the government prints money from the central bank to reduce fiscal pressure and macroeconomic stability.
