Prime Minister Sheikh Hasina has directed the National Board of Revenue (NBR) to not raise duty on imports, source tax at income tax and VAT on imports and consumers’ end on essential commodities, food and agricultural goods as food inflation jumped to 10.22 per cent in April.
However, some 15 products will likely face a unified 15 per cent VAT in the upcoming FY2024-25.The International Monetary Fund (IMF) earlier recommended NBR to propose a unified 15 per cent VAT for all products and services, despite the possibility that such a move may shrink consumers’ purchase power.
The discussion between the prime minister, NBR Chairman Abu Hena Md RahmatulMuneem and policy officials was held on Tuesday, where the tax officials took the prime minister’s approval of all the major changes in the document for the FY25 national budget, according to officials who attended the meeting.
Prime Minister Sheikh Hasina approved NBR’sproposal to curtail lawmakers’ facility of importing duty-free vehicles, by imposing25 per cent customs duty (CD) and 15 per cent VAT on MPs car imports — which are the highest ratesof such duty and tax.
MPs do not pay any supplementary duty (SD), advance tax (AT) or advance income tax (AIT), while regular consumers are currently paying a maximum of 500 per cent as SD, excluding other taxes.
Moreover, investors at Bangladesh Economic Zones Authority (BEZA) and Bangladesh Export Processing Zones Authority (BEPZA), Hi-Tech Park Authority will likely have to pay CD and VAT like MPs, but they also may face other taxes including SD.
Apart from that, the prime ministeralso directed to curtail duty-free import facilities for investors in case of products that are now being produced locally, such as construction materials.
IMF earlier recommendedthat NBR come out from the duty-free regime and revenue officials approached the prime minister on this issue but she did not agree with that. Currently, some food items, food grains, agricultural inputs, including fertiliser, and some basic industrial raw materials enjoy zero-duty facilities.
Some basic industrial raw materials may face at least 1 per cent duty in the next fiscal year while the others will remain unchanged.
NBR proposed to cut the baggage rule facility and said that no one would be allowed to bring gold barsmore than once in a single year, but the prime minister opposed the idea and said that as individuals pay duties under the baggage rule, it wouldcontinue with clearing taxes.
No further exemption
At Tuesday’s meeting, VAT officials placed some proposals to Prime Minister Sheikh Hasina seeking approval for giving exemption towards some new sectors, but she disagreed.
“No new tax exemption. Instead, we need to leave such culture behind. There is also no scope to cut any of the existing rates as people have already gotten used to them,” officials who attended the meeting quoted the prime minister as saying.
The prime minister also directed to not extend the duration of exemptions for any sector that is nearing the end.
NBR also proposed to reduce VAT on pesticides. As farmers and producers are used to the existing rate now, the prime minister disagreed.
However, regarding the proposal to increasethe source tax on selling rice and other goods to the government, the prime minister directed NBR to not do that as most farmers are not eligible to pay taxes.
Besides, SD on mobile talk time may rise in the coming fiscal year.
Corporate tax to drop by 2.5%
In the proposed budget for FY25, the corporate tax rate may see a 2.5 percent cut. The prime minister approvedthe proposal on conditions that compliancewill be maintained, aim will be encouraging companies to pay more taxes and increasing transparency in tax payments.
NBR officials said that previous statistics show that whenever a year saw a cut in corporate tax, the overall revenue of that year has gone up.
The prime minister on Tuesday also approved the NBR’s proposal to end individual investors’ exemption from paying capital gains tax on listed stocks, mutual funds, bonds and debenturesin line with the IMF’s prescriptions from the next fiscal year.
To curb harassment, tax officials’ practice to assess returns may also end from FY25, and it will be assessed by tax inspectors. The wing will then go to fully automated systems to reduce physical interaction between tax officials and taxpayers.
As inflation hits mostly the lower income group, the income tax rate for individuals will remain unchanged even though IMF earlier recommended raising the tax-free income threshold to Tk 5 lakh from the existing Tk 3.5 lakh, along with abolishing tax exemptions on employment allowances, benefits other than the basic salary, and investments for individuals.
IMF also recommended repealing all sorts of tax exemptions on information technology-enabled services (ITES) but the prime minister opposed the suggestion, saying that exemption in ITES will not go and will remain as it is now. She also said that she will inform what will happenlater, according toofficials who attended Tuesday’s meeting.
