CPD for 30% income tax on top earners

The country’s think-tank Centre for Policy Dialogue (CPD) proposed that the National Board of Revenue (NBR) reinstate the highest tax rate at 30 per cent for top earners in the FY25 budget.

In the FY21 budget, the highest rate for top earners was reduced to 25 per cent from 30 per cent. It has remained unchanged ever since, and CPD argued that reducing the highest tax rate was against the cause of promoting tax justice.

The CPD made this proposal in a pre-budget discussion with the NBR at its building in the capital’s Agargaon on Sunday.

It also recommends an advance income tax structure for the owners of private motor cars in FY25. For a car or jeep which is not exceeding 1500cc, it proposed Tk 25,000 AIT for hybrid and fully electric vehicles, and Tk 26,750 for conventional fossil fuel vehicles.

The highest AIT of Tk 3 lakh is proposed for a conventional fossil fuel car or a jeep exceeding 3,500cc, while Tk 2 lakh is proposed for the same type of hybrid or fully electric vehicles.

It has also proposed to increase by an additional Tk 1 lakh for the second slab for personal income tax taking into consideration the higher inflationary pressure. The CPD said, “In FY24, tax free income threshold for personal income was raised to Tk 3.5 lakh.

The second slab for personal income, which is 5 per cent for additional Tk 1 lakh, should be increased to Tk 2 lakh to account for persistent high inflation, particularly those of food items.

The think-tank also proposed to raise corporate tax, saying, “For FY25, the corporate tax rates should go back to the pre-FY23 level.

In the FY23 budget, the corporate income tax rate for non-publicly traded companies was reduced from 30 per cent to 27.5 per cent.

Meanwhile, CIT rates for publicly traded companies that Issue shares worth more than 10 per cent of its paid-up capital through IPO had been reduced from 22.5 per cent to 20 per cent.

It also recommends raising Health Development Surcharge on cigarettes and other tobacco products to 5 per cent from the existing 1 per cent.

SME Foundation proposed to raise tax-free income to Tk 4 lakh from the existing Tk 3.5 lakh for men, and for women, an increase of Tk 5 lakh from the existing Tk 4.5 lakh. Besides, it proposed to increase the tax rebate on taxable income of individual SMEs from 3 per cent to 5 per cent.

In case of government securities, the foundation proposed to increase the investment limit from Tk 5 lakh to Tk 10 lakh and urges to reduce source tax on cash incentives received against exports from 10 per cent to 5 per cent.

The Bangladesh Economic Association (BEA) said, “The existing vat and tax structure is not aligned with the country’s changing economic structure. So we propose a reform of the current tax and VAT structure, and the tax collection administration.

“If NBR increases VAT collection from services and goods sector comparatively, the overall revenue collection will be raised in the coming days.”

It proposes an imposition of specific excise tax at 70 per cent on all types of cigarettes. In that case, the price of cigarettes will be increased by 130 per cent on average, and the consumption will be reduced by 66 per cent.

Presiding over the event, NBR chairman Abu Hena Md Rahmatul Muneem said, “We cannot bring up the SMEs. I personally see the future of SMEs as very bleak. Big players have taken the place of SMEs. How will these be fixed up and which side will I handle?”

“It needs to be analysed where the problem is, and where to work. It should be scrutinised why the SMEs are not flourishing yet. I have provided various types of policy support to them on behalf of the NBR, but it is necessary to see why they are not doing well.”

He added, “SMEs say that they are not yet able to produce quality products. Yet SMEs in different countries survive by producing quality products, and creating backward linkages. But SMEs in the country are not growing in a similar way.”