A decision has been made by the government to reduce the corporate tax in the upcoming budget for all listed and non-listed productive-oriented companies to create breathing space for the private sector during the pandemic.
The tax rate will be set for 30 per cent from the existing 32.5 per cent for non-listed companies and at 22.5 per cent from 25 per cent for the listed ones in the fiscal year of 2021-22, as a gift of ‘Mujib Year’, as stated by the finance ministry.
Other sectors’ tax rates will remain the same.
Sources have stated that the National Board of Revenue has taken this initiative after a directive from Prime Minister Sheikh Hasina to give importance to the local industries in the next budget.
It was also stated that the revenue target for the next fiscal year will remain unchanged and the tax structure will be kept the same.
Focus of the upcoming budget will be on bringing in more investment in local industries. Considering the current situation of local industries, the government has taken the move to reduce corporate tax by 2.5 percentage points.
The sources have stated that if the industries survive, production will increase, so will export earnings. New jobs will be created as well, contributing to an increase in people’s income, which might be reflected in the total revenue earnings.
The president of the Dhaka Chamber of Commerce and Industries (DCCI), Rizwan Rahman, stated that, “We have urged the government to reduce corporate taxes by at least 2.5 percentage points each year and that it will boost the confidence of the business community.”
Terming Prime Minister Sheikh Hasina a friend of the private sector, Rizwan said, the PM has taken initiatives that are helpful to create a business-friendly environment during the pandemic.
The DCCI president said if the government reduces tax rates, it will help draw investment in the local industries. More foreign direct investment will come as well. Therefore, the further expansion of the tax net is inevitable.
Based on the current tax structure, there are 8 slabs of corporate taxes, 25 per cent for listed companies, 32.5 per cent for non-listed companies, 37.5 per cent for listed banks and those approved after 2013, and 40 per cent for non-listed banks, 37.50 per cent for merchant banks, and 15 per cent for cooperative organisations.
Manufacturers of cigarettes, jorda, gul and other tobacco products have to pay a 45 per cent corporate tax, while listed mobile operators pay 40 per cent and an additional 20 per cent on dividend income.
Besides, apparel exporters have to pay a 12 per cent corporate tax and it is 10 per cent for green factories.
Abul Kasem Khan, chairman of the Business Initiative Leading Development (BUILD), said, “It will be a landmark step in the country’s history. The corporate tax cut will boost business people’s confidence.
“The business community needed this help to survive during the adverse situation caused by Covid-19.”
The former DCCI president said, “Alongside local investors, the corporate tax cut will also attract foreign investors – those who want to make new investments in Bangladesh.”
He believes the government should also fix the corporate tax at an effective rate as businesspeople are facing challenges because of the advance tax. If anyone has a chance to get a refund that should be allowed.