Tax rates for a longer period or gradual increase or decrease in taxes with specific planning is considered one of key fiscal measures to lure investment. Bangladesh's businesses have long demanded gradual cuts in high tax rates in a bid to estimate their cost of investment and prepare future plans.
Investopedia, one of leading sources of financial contents on the web, comes in aid. The tax guidebook says every investment has costs. Of all the expenses, however, taxes can sting the most and take the biggest bite out of returns of investors.
It states that tax-efficient investing can minimise tax burden and maximise bottom line-whether investor wants to save for retirement or generate cash.
The Schwab Center for Financial Research that provides individual investors with quality research and decision-making tools evaluated the long-term impact of taxes and other expenses on investment returns.
It also found that minimising taxes also has a significant effect.
In Bangladesh, the government brings changes in many of the tax rates every year through national budget that other countries also do. Changes in tax rates for individuals, corporate and import-stage taxes leave significant impact on consumer products on the local market.
Both local and foreign investors often found it difficult to determine the actual payable taxes on import products as taxes are imposed in different forms on a product. Cut in customs duty on a product doesn't mean that prices of that product will go down as there are various forms of taxes which also need to be brought down. There are various forms of taxes on an import product, including Customs Duty (CD), Regulatory Duty (RD), Supplementary Duty (SD), Advance Tax, Advance Income Tax (AIT), Value Added Tax (VAT) at import stage etc on local production. There are also VAT and different types of withholding taxes.
Unlike in previous years, the government has made several changes to tax structures in the budget for Fiscal Year 2021-22, announced on June 3, 2021.
The tax rates are determined through the Finance Act after getting the nod from policymakers in parliament. The tax rates have been imposed by the National Board of Revenue (NBR) through issuing Statutory Regulatory Orders (SROs) - circulars. However, in most cases, those SROs and circulars are not easily understandable to know what the actual tax rate would be on a product.
Importers face the problem most as they have to determine the actual cost of the product to fix consumer prices. Changes in any of the tax rates by the three wings of the NBR---income tax, customs and VAT---leave impact on the pricing of imported products. As per present practice of SRO or circular issuance, each of the three wings issues their SRO or circular on tax changes separately.
Investors find it difficult to estimate cost of an import item calculating or compiling various taxes scattered in the SROs.
For example, a recently published SRO on reduction in import taxes on rice says CD has been cut to 10 per cent and RD has been waived. How an importer would know what would be current import taxes on rice?
Addressing the difficulties of investors, a book has been published with the details of all import items' HS code, total tax rates and others. Tax rates of thousands of import products have been accommodated in the book titled Bangladesh Customs Tariff Solution.
Mohammad Ruhul Amin, an NBR official, compiled the book to give a clear picture of import taxes on each of the items for investors, manufacturers and commercial importers. The 2021 edition, the 10th one of the book by Liton Publications, has incorporated all the measures of tax or exemption from it in the budget for fiscal year 2021-22
The book has accommodated tariff description as per first schedule, commercial description (only for simplification marked), SRO reference, total tax-incidence (TTI) calculation method, HS code-wise tariff value and minimum value, images of some products, customs procedure code (CPC), prohibition of import policy, export duty and the like.
With the help of this book, investors, importers and other businesses would get a compiled and complete picture of tax rate on a product.
All of the essentials, luxuries, and commercial products having high, medium, low or zero-rated duty have been accommodated in the book.