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NBR's pre-budget parley

Think-tanks for tax measures with high inflation in mind

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Local think-tanks have urged the revenue authority to carefully craft the tax measures for the next fiscal year (FY 2023-24) considering mounting inflation, proposing cuts in taxes and duties on imports of 28 essential items as well as widening the tax-free income threshold.

They also stressed the need for creating a welcoming environment for new investments in the country and increasing the tax-GDP ratio.

They put forward the recommendations at a pre-budget meeting at the National Board of Revenue (NBR) office in the city on Tuesday, presided over by NBR Chairman Abu Hena Md Rahmatul Muneem.

Representatives from the Centre for Policy Dialogue (CPD), the Bangladesh Economic Association (BEA) and Bangladesh Institute of Development Studies (BIDS) were, among others, took part in the discussion.

The CPD proposed to reduce duties on the import of 28 daily essentials to rein in soaring prices of the commodities.

Although the duties and taxes on sugar were reduced recently, according to an analysis, 28 imported essential items were still facing high rates of taxes, it said.

Speaking at the event, CPD research fellow Muntaseer Kamal proposed increasing the tax-free income limit of individual taxpayers from Tk 300,000 to Tk 350,000 amid soaring prices, particularly the food items.

Moreover, the amount of taxable income in the second slab which is now Tk 100,000 should be increased to Tk 300,000 to provide a cushion to the limited-income groups, he added.

In the FY '23 budget, the individual income tax structure remained unchanged.

The CPD argued that reducing the highest tax rate (from 30 per cent to 25 per cent) was against the cause of promoting tax justice. In the current budget, the rate of investment tax rebate has been fixed at 15 per cent on the eligible amount.

This means that higher taxpayers, or top earners, get higher tax benefits whereas those with annual income below Tk 1.5 million will not get any additional tax benefits.

The withdrawal of this provision needs to be considered in the FY '24 budget, proposed the think-tank.

It also requested abolishing the opportunity to whiten black money with the offshore tax amnesty and make a time-bound plan to phase out tax exemptions.

The BIDS representative called for creating a database of potential taxpayers and offered the institute's support to the NBR in this regard.

He urged the NBR to bring automation and innovation in the tax administrations to increase tax-GDP ratio.

He also called upon the NBR to introduce bonus and incentives as a strategy to expand the tax net and increase the volume of taxes.

PricewaterhouseCoopers (PWC) proposed providing tax identification numbers to the global service providing organisations working in Bangladesh. It said the government is losing revenue since many of such entities do not have offices in Bangladesh.

The BEA took its stance in favour of continuing with the existing protection policy for the domestic industries and said the rich countries have become developed by adopting all kinds of protectionist measures.

"After getting rich, they are now promoting free market economy," it said.

Snehasish Mahmud & Company representative Snehashish Barua recommended that the RJSC should not execute share transfer from non-residents to residents unless due capital gain tax is paid, but there is no such provision for transfer of shares from residents to residents.

"Share valuation reports certified by professional accountants must be submitted before executing transfer of shares," he added.

He also recommended imposing 10 per cent tax on the difference between real transaction value and deed value by the real estate companies.

Mr Muneem said an initiative has already been taken to identify the owners of big houses and flats in the district headquarters to widen the tax net.

Lists are being prepared on potential taxpayers representing various professions like doctors, lawyers, engineers, owners of shops in various markets and shopping malls as well as the affluent class of the society.

"It will be easier for us to identify those potential taxpayers who are still outside of the tax net," he said, adding that the revenue board has a plan to create awareness about tax and its importance in national life.

Mr Muneem said that although they have been giving tax exemptions in various sectors every year through issuing SROs, there is a need to come out of such a culture.

However, he added, it would not be easy to do it in one step, rather "we need to come out of such a culture in phases through framing long-term work plan".

The NBR chairman also said the tax-GDP ratio should be increased at a faster pace than the prevailing one to meet the challenge of LDC graduation.

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