Allow 20% cash payment against annual turnover in FY24

The Foreign Investors’ Chamber of Commerce and Industry (FICCI) has proposed that the National Board of Revenue (NBR) should include provisions in the budget for FY2023-24 to detect undisclosed assets and income by requesting banks to provide ETIN-wise account numbers through Bangladesh Bank (BB) to increase revenue mobilisation.

NBR should reconcile taxpayers’ declaration of bank accounts and BB database to ensure completeness of reporting on tax returns, FICCI proposed in the pre-budget discussion, organised by NBR at its office in Dhaka, on Wednesday.

FICCI also called for introducing an allowable limit to expedite the transition to a cashless economy, saying it needs to be acknowledged that a major portion of the economy is still informal, where non-cash payments are still not widely accepted.

To allow the gradual transition to a cashless economy, allowable limits for cash payments can be gradually brought down to 0 per cent after four years, starting with allowing a 20 per cent cash payment limit against the annual turnover in the upcoming budget, FICCI said.

FICCI President Naser Ezaz Bijoy also proposed to reduce the effective tax rate since the existing one in the country is extravagant.

Although the applicable corporate tax is 20 per cent and 27.5 per cent for the publicly traded and private limited companies, respectively, the effective tax rate is much higher due to the implication of disallowance of expense and deduction of tax at source, he said.

“Therefore, we are proposing to reduce the effective tax rate in conjunction with the tax rate in our neighbouring countries,” he added.

FICCI also recommended the rationalisation of tax deduction at source (TDS) and treatment of disallowance of cash transactions to reduce the effective tax rate.

Naser also suggested using the DVS system to identify income and expense, which can be useful to rationalise TDS and eliminate TDS from the minimum tax provision gradually as well.

He said that every registered person is currently required to issue a tax invoice manually while making supplies. This consumes time and is an obstacle to digitalisation.

“If we look into the world economy, our national economy is doing well in comparison to the global market. Hence, the technique used to gather Mushak must adhere to international standards,” he added.

The FICCI president also recommended the development of an automated VAT challan, also known as an E-Invoice or Electronic VAT Challan, and it must replace the need for a manual tax challan.

The implementation of this system will make it much simpler for taxpayers to conduct business while also making it much simpler to oversee the tax authorities and taxpayers, he stressed.

Presiding over the discussion, NBR Chairman Abu Hena Md Rahmatul Muneem said if digital invoices can be introduced in every sector, nothing more is required because the submitted returns can then be easily assessed by the tax, VAT and customs departments.

But the practice of maintaining manual invoices is also less in the country, he said. “We have to work on it so that the seller is obliged to give a digital invoice.”

“Besides, 1 per cent cash transaction against the annual turnover is huge for large companies. In contrast, 10 per cent is a small amount for small businesses. So, we have to find out first the actual necessity and understand where the cash payment is required,” he added.