The National Board of Revenue (NBR), to grant reprieve to individual taxpayers and boost private sector along with industrialisation, provided an estimated Tk 1,25,813 crore exemption on income and corporate taxes, which is 3.56 per cent of the country’s GDP.
Of the figure, Tk 40,498 crore – accounting for 1.15 per cent of the GDP – is exempted at individual taxpayers’ level, while Tk 85,314 crore or 2.41 per cent of the GDP is incentivised at the corporation level.
NBR’s income tax wing has prepared the data in a purview of rationalising tax expenditure for the upcoming budget to meet the $4.7 billion loan condition of the International Monetary Fund (IMF). Some rationalisation is likely to come up in the next budget for FY25.
Meanwhile, the country’s think-tank Policy Research Institute of Bangladesh (PRI) has recently stated that tax expenditure or exemption will be increased as these go on as is.
Addressing a recent event, PRI Executive Director Ahsan H Mansur had said, “If Bangladesh does not take any initiatives for reform and things go on as is, the country’s accumulated potential revenue loss will be around Tk 50 lakh crore by the end of FY41, which is almost equivalent to seven times the current budget size of the government.
“Phasing out some of the exemptions over a period of 3-4 years has the potential to raise Tk 60,000 crore, while more extensive reform measures are designed and begin to be implemented.”
Tk 15,315cr exempted on microcredit, Tk 8,380cr on power, energy
The government gives Tk 15,315 crore corporate tax exemptions on microcredit programmes, showing spirit towards empowering mostly rural women and helping poverty alleviation, Tk 8,380 crore on power and energy sector to ensure electricity, oil and gas at affordable prices.
The NBR also exempts Tk 4,611 crore at economic zones and high-tech parks to boost foreign direct investments (FDIs) and local technology businesses, Tk 3,437 crore to incentivise RMG, textile and accessories sectors, and Tk 1,477 crore on IT-enabled services and software industry.
Tk 143 is exempted on fish, poultry and duck farming.
The IMF in a recent discussion with NBR has proposed to withdraw the tax exemption facility for the information technology industry, which is scheduled to end in June 2024.
Meaning there will be no scope to further extend this facility as per the global lender but industry insiders oppose that and seek continued support till 2031 to make the country smart.
Industry insiders however say the analysis is faulty.
On the issue, BASIS President Russell T Ahmed said, “The NBR should be smarter in analysis. Several groups of companies are taking exemption facilities in the name of their small IT companies.
“It is the NBR’s responsibility to catch the loopholes and evasions, and there is no scope to tax small and medium startups and IT service companies.
Analysis shows the NBR provides more tax incentives in these sectors and industries while accumulating exemptions at VAT and customs – the other two wings of revenue board – levels.
NBR Chairman Abu Hena Md Rahmatul Munim recently said at an event, “Our tax expenditure has increased as we began focusing on manufacturing, and local industry. We have focused on those which increase economic activity which improve our socioeconomic indicator.”
“The NBR is providing policy support towards industry and different sectors and those sectors are growing. Now, we are finding and supporting them so that middle income consumer goods can be produced locally.”
Tk11,287cr exempted on remittance
The NBR provided Tk 11,287 crore income tax exemption at individual taxpayer level on foreign income, mainly on remittance, Tk 2,985 crore on fish, poultry and duck farming, and Tk 965 crore on capital gains.
The IMF delegation has proposed the NBR to withdraw tax incentives being offered on remittance.
Ahsan H Mansur however said, “As the country needs to increase foreign currency, there is no scope now to impose taxes on it. But the government will have to go back on track. In that case, the government should avoid double taxation on global income.
The government provides most of the tax incentives to individuals in the name of tax rebate on some types of investment such as in life insurances, government securities, mutual funds, ETFs, and publicly listed securities, as well as on passive investment income from various bonds, and zero coupon bonds.
The government also provides tax incentive on 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.
The IMF had proposed to abolish these types of tax incentives. Capital gains from stock market investments made by individual investors will end this FY24 and it will likely be taxed in the upcoming FY25 in line with the IMF prescription, confirm sources involved in the budget formulation.
In this regard, State Minister for Finance Waseqa Ayesha Khan had recently said, “I think the exemption needs to be rationalised. One hundred and twenty types of exemptions have been provided for the private sector in the last five years.
“This rationalisation will require the involvement of the private sector. Many industries sought exemptions 25 years ago, do they still need them? Do we give our children pocket money till they are 30 years old? We have to move forward, and must act mature.”
