26/04/2018
AS THE GOVERNMENT IS UNLIKELY TO TAKE NEW BUDGETARY MEASURES IN THE NEXT FISCAL YEAR, CONSIDERING IT AN ELECTION YEAR, IT WILL BE BURDEN ON EXISTING TAX PAYERS!!
By Advocate ASM Waheduzzaman
Date: 26.04.2018
The next year's budget is likely to be presented in parliament in the first week of June next. Brisk preparations are already on from the government side to have forethoughts from the economists, business leaders, think tanks and intellectuals (herein after referred to as “Pressure Group”) and accommodate their recommendations in the budget.
The government has plan to increase the threshold of tax revenue collection of about Tk 3.5 trillion in this year's budget from the previous year’s target of Tk. 2.48 trillion. As the government is unlikely to take new budgetary measures in the next fiscal year, considering it an election year, it will be burden on existing tax payers. Therefore the Pressure Group urges repeatedly to reduce corporate tax rate and expand tax net rather than imposing more tax on existing taxpayers. Considering the recommendations of the business leaders, the Finance Minister AMA Muhith on the day of pre-budget meeting with the editors of top newspapers said that the current corporate tax rate in Bangladesh is quite high, and there are many layers depending on types (of the corporate entities). Therefore government will take steps for existing measures to be made better or perfect and new tax net to be implemented as follows:
1. imposing tax on advertisements provided on Facebook and Google (from the country);
2. Introduction of landing fees on Indian channels aired in Bangladesh.
3. the transport sector is big-group for tax collection.
4. thinking to bring down the corporate tax layer to two.
5. To reduce existing TAX and VAT on newsprint.
6. to bring down the corporate tax layer to two.
7. trying to find out a formula to avoid taxation on dividends that are transferred by the main or principal companies to their subsidiaries.
8. To rationalize the expense limit on royalty, technical knowhow, etc.
9. duty free or bonded warehouse for imported raw materials to make product for overseas market.
10. trying to implement convenient VAT system keeping several rates of VAT
According to NBR chairman, the revenue authority and the government are committed to examine the scope to reduce the corporate tax rates, specially to reduce the rate gradually from 30% to 25% for non-listed companies by 2020-21, said the NBR Chairman in pre-budget meeting with DCCI. He also said that NBR is working to give some privileges to the compliant tax payers especially for those who are honored as Kar Bahadur (tax icons). In another discussion with BCI he says that NBR also plans to slap penalties for cases of VAT evasion.
The government and the Revenue Authority have already sit for pre-budget meeting with FBCCI, MCCI, DCCI, BCI, BASIS, BCS, BMPIA, BEMMA, ISPAB, BKMEA, EAB, etc. to have forethoughts and proposals from those business leaders. Those proposals are as follows:
Proposal:
1. DCCI proposes lowering the corporate tax rates of different companies in phases in next three budgets by 5%, 7% and 10%.
2. MCCI proposes reducing the tax rate of listed/non-listed company to 2.5%.
3. DCCI proposed corporate tax for non-listed companies to 30% from existing 35% and for listed companies for to 20% from 25%.
4. DCCI proposes, the tax is 10% on the income from corporate dividend.
5. DCCI proposes the limit of turnover tax should be extended up to 1 crore 20 lac.
6. BCI urged the NBR to give tax benefits to the companies that are investing 5% of their taxable income for research and development.
7. The FBCCI proposed cutting corporate tax rates by 2.5 per cent for all companies.
8. The FBCCI also proposed withdrawing advance income tax on import, rationalizing gross profit determination system, reducing customs duty on basic raw materials to 3.0 per cent, and conducting regulatory impact assessment of VAT law.
9. The business leader of FBCCI suggested keeping the income tax rate 10-12% instead of 35% for garment accessories same as textile and garment items.
10. EAB & BKMEA demand VAT free miscellaneous expense, because major portion of this section is tolls or bribery amount.
11. EAB & BKMEA also proposed to declare the factory area as duty free bonded warehouse.
12. EAB & BKMEA demand to give permission to supply goods according to purchase order.
13. EAB & BKMEA demand reduction rate on export tax.
14. Real Estate & Housing Association of Bangladesh (REHAB) says that although the registration tax is 14 per cent, in reality it is 16 per cent which is very high. This must be made time-befitting.
15. REHAB states that basic construction raw materials like rod, cement and stone have increased. About 80 per cent stone is imported, for which 69 per cent tax and VAT have to be paid which is very high. This must be revised.
16. E-commerce association representative said e-commerce traders or entrepreneurs should be brought under information technology-enabled services (ITAS) and their income be tax-free.
17. Bread manufacturing association representative said that there should not have any VAT on confectionery items like bread and biscuit.
18. MCCI recommends to increase in allowable expense on royalty, technical knowhow, etc. from 8.0 per cent of disclosed profit to the actual accounts.
19. MCCI gives proposal for reducing the taxes on basic raw materials and intermediate goods to make local industry competitive.
20. MCCI also demands to consider the entire expenditure of Corporate Social Responsibility (CSR) as an allowable.
21. BCI demanded the introduction of concessional tax rate in the under developed regions.
22. BCI feels necessity to provide tax breaks to the backward linkage industries of export oriented sectors.
23. Pressing the budget proposals of BASIS, its president said VDS and TDS should be fully waived for local software and IT service including the internet service providers or ISPs.
24. BASIS demands that e-commerce, online shopping, IT training, information technology enabled services (ITES) consultancy, software consultancy, and annual software maintenance contracts (AMC) should be tax-free by considering these as IT-enabled services.
25. BCS secretary general demanded slashing Advance Trade VAT (ATV) on the sale and supply of imported computer and its other accessories from 4.5 per cent to 3.0 per cent and continuing VAT exemption on these products till 2021.
26. BCS proposed duty and VAT immunity on computer products like monitor (up to 28 inches), UPS (up to 2000va), WiFi and WiMax router and LAN card.
27. Mentioning that seven companies are going to set up mobile phone manufacturing plants in the country, BMPIA president proposed to reduce duty on locally manufactured mobile phones from 16 per cent to 1.0 per cent in the budget for 2018-2019 fiscal to encourage the investors.
28. Referring to only 1.0 per cent growth in the imported smartphone market last fiscal, BMPIA president proposed to slash total tax incidence (TTI) from 30.19 per cent to 22.19 per cent in the next budget.
29. ISPAB representative demanded VAT waiver on the office rent of ISPs and removing 10 per cent customs duty (CD) on internet modem, ethernet interface card, computer network switch, hub, router, server, and other internet equipments.
30. ISPAB’s representative called for abolishing existing 12 per cent Tax Deducted at Source from the revenue of internet service providers (ISPs) and he also proposed to lower corporate tax on ISPs from existing 35 per cent to 10 per cent
31. MCCI says about withdrawal of the provision of penalizing an employer for non-submission of income tax by its employee.
32. MCCI also says about withdrawal of the provisions of disallowance of perquisite paid to an employee in excess of BDT 4, 75,000.00.
33. FBCCI demands for raising the tax-free ceiling for individual taxpayers to BDT. 350,000.00 from BDT 250,000.00 increasing the tax-free ceiling of surcharge to Tk 30 million.
34. DCCI demands surcharge free up to 5 crore taka valued asset.
35. DCCI also proposed Tax waver on expenses up to BDT 1,20,000.00 for education for children of taxpayers.
Budget being a statement of income and expenditure of a country for a period of time, the entire financial system comes under spotlight at the time of preparing the budget. It is true that a major part of a nation's expenditure is always met from revenue earnings that include collections through various forms of fees, tax, VAT, supplementary duty and other regulatory payments. We all have to concentrate on Tax-GDP growth. As per CPD observation despite the high GDP growth, not enough number of jobs was created in the industrial sector; most of the employment was created in service sector. It also recommended restraining the influence of vested interest groups while formulating national economic policies, vigilance over the role of commercial banks and an end to recapitalization of state banks with taxpayers' money.
Although still on a small scale, Bangladesh is a global player now. It should see whether its tax regime is in alignment with those of the other countries. It should also verify whether the tax regime is a good one for its objective of attracting more investment in the economy. High tax rate does not necessarily bring more revenue for the government. Rather, a low tax rate encourages people with taxable incomes to come forward to pay tax with more transparent disclosures.
