The government has eliminated depletion allowances for oil and gas extraction companies in the fiscal year 2024-25 to boost revenue collection, as outlined in the recent finance bill. Previously, these companies received tax waivers on extraction expenses, but this benefit has been removed following recommendations from the International Monetary Fund (IMF) to improve Bangladesh’s tax-GDP ratio.
Industry insiders warn that this change could hinder the government’s extraction plans by increasing the tax burden on these companies, potentially leading to greater reliance on liquefied natural gas (LNG) imports amid foreign currency shortages. The National Board of Revenue (NBR) anticipates an additional Tk 3,000 crore in revenue if the proposal is approved by parliament.
The removal of the depletion allowance is expected to double extraction costs for companies operating under two types of contracts: rental payment contracts and production sharing contracts. The latter allows companies to claim up to 80% of resources as extraction costs, previously tax-exempt under the depletion allowance.
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