Corp tax cut not helping due to higher TDS

Businesses are unable to get benefited from reduced tax rates due to higher tax deducted at source (TDS) and restrictions imposed on transactions, according to the Metropolitan Chamber of Commerce and Industry (MCCI).

The effective tax rate is higher in our country. Even though the government has cut the corporate tax rate by 2.5 per cent in the last budget, it’s not helping the businesses much, MCCI President Saiful Islam said at a pre-budget meeting for FY2023-24, organised by the National Board of Revenue at its office in Dhaka, on Wednesday.

Taking into consideration the issue that the effective tax rate becomes 40-50 per cent although it is 20 per cent for the public limited companies, he called for cancelling the condition of transactions through the banking channel and cutting the use of cash.

Saying the main reason for this is the disallowance of expense and TDS, he said, “It has become impossible for businesses to avail the corporate tax cut benefits.”

The MCCI president emphasised digitalisation and simplification of the overall tax management by introducing a proper online system. “The automation activities will go faster through e-invoicing,” he added.

Moreover, MCCI proposed to reduce the tax rate of individual taxpayers and rationalise the income tax, value-added tax and duty for the import of industrial machinery to expand the local market as well as the industry.

It urged to withdraw the existing 2 per cent source tax on essential commodities, including rice, wheat, potatoes, onions, garlic, chickpeas, pulses, turmeric, chillies, maize, flour, salt, edible oil, sugar and all kinds of fruits.

MCCI has also demanded the provision of online hearings by making necessary amendments to the existing laws at the level of the tax assessment system, appeals, tribunals, and alternative dispute resolution. NBR Member Masud Sadiq presided over the meeting that was attended by business leaders and other senior officials related to budget preparation.