Home ›› 03 Jun 2022 ›› Front
The government is considering reducing corporate tax rates imposed on businesses for the third time in a row in the national budget for the upcoming 2022-23 financial year.
At present, listed companies pay 22.5 per cent corporate tax while unlisted companies pay the tax at 30 per cent.
According to sources in the Finance Ministry and NBR, authorities concerned will propose a 2.5 per cent cut in the upcoming budget.
However, businesses will have to meet some conditions to get the benefits. Failure to do so could even result in a 2.5 per cent tax hike in certain cases instead of a reduction, which has left businesses sceptical.
On the other hand, the tax-free income limit for individual taxpayers may remain the same in the next fiscal.
The National Board of Revenue (NBR) is mulling these ideas to increase the coverage of direct taxes and attract more private investment — both local and foreign — in FY2022-23.
Meanwhile, the black money whitening facilities may be extended by another year. The NBR also plans to double the source tax on export earnings. All these moves aim to increase revenue collection.
Finance Minister AHM Mustafa Kamal is set to table a Tk 6,77,864 crore budget for FY2022-23 in parliament on June 9, with a projected GDP size of Tk 44,12,849 crore and a Tk 2,44,913 crore deficit.
The total revenue collection target has been set at Tk 4,33,000 crore. Of this, NBR would collect Tk 3,70,000 crore. Of the NBR’s sub-sectors for revenue collection, Tk 1,17,946 crore would come from income tax alone, say the projections.
Corporation tax conditions
In the two previous fiscals, the NBR had cut the corporate tax rates by 2.5 per cent on each occasion.
If the 2.5 per cent reduction proposal for the next fiscal gets the green light, listed companies will pay corporate tax at 20 per cent and nonlisted companies at 27.5 per cent.
However, the first condition says the companies that have released more than 10 per cent of the paid-up capital shares through IPO will only get this benefit. And the second condition: all types of transactions, except cash expenditure and investment up to a total of Tk 12 lakh per annum, must be done through bank accounts. If the listed companies fail to meet the conditions, they will have to pay corporate tax at a 22.50 per cent rate.
Moreover, listed firms will have to pay tax at the increased rate of 25 per cent if they fail to transact cash expenditure and investment up to a total of Tk 12 lakh per annum through banks.
On the other hand, the tax rate for companies that have released less than 10 per cent of the paid-up capital shares through IPO will remain unchanged at 22.50 per cent. For companies not listed in the capital market, the first condition says, the corporate tax will remain at 30 per cent if all types of transactions, except cash expenditure and investment up to Tk 12 lakh annually, are not done through bank accounts.
The conditions are the same for one person companies (OPC) as well if they want to enjoy a 2.5 per cent tax cut and pay tax at 22.50 per cent, down from 25 per cent.
The existing structure
At present, listed banks and insurance companies pay corporate tax at 37.50 per cent, unlisted banks and insurance companies at 40 per cent, and merchant banks at 37.50 per cent.
Companies that produce cigarettes, bidis, chewing tobacco and other tobacco products are levied a tax rate of 45 per cent.
Listed mobile phone operators pay taxes at 40 per cent and unlisted operators at 45 per cent.
Co-operative societies and private universities and medical colleges pay tax at 12 per cent.
Apart from them, environment-friendly and compliant readymade garments companies are charged 10 per cent tax while the general ones pay 12 per cent.
Textile companies pay corporate tax at 15 per cent, and this rate will remain until 2025.
Black money facilities
Like the past few fiscals, the government may continue the opportunities allowing black money whitening facilities in FY2022-23.
At present, one can whiten black money by investing in the stock market or by buying land and flats at a fixed tax rate. These facilities were supposed to end on June 30 this year.
According to NBR sources, these facilities will be extended for another year.
Source tax to double
In the next fiscal, the NBR plans to double the source tax on export earnings to increase revenue collection.
At present, the source tax is being levied at 0.50 per cent of the export income of all types of goods. It will expire on June 30, the last day of the outgoing FY2021-22. This rate may go up to 1 per cent in the next budget, NBR sources said.
However, the government is considering this move at a time when the rising global inflation and a hint of recession are forecasting sluggish exports in the coming months. Under these circumstances, businesses fear that doubling the source tax rate will only lead to a crisis.
Apparel factory owners and entrepreneurs said that increasing the source tax would adversely affect export earnings and worsen the country’s current foreign exchange crisis.
