Budget

Full text of finan minister's budget speech

National Budget 2022-23 Page Four


Bangladeshpost
Published : 10 Jun 2022 01:24 AM | Updated : 10 Jun 2022 01:34 AM

Madam Speaker

National Social Insurance Scheme

219.     The government is working to launch a National Social Insurance Scheme in the country. A study has already been conducted on this scheme, at the initiative of the Cabinet Division, by laying emphasis on the gradual introduction of four types of social insurance in the country. These are Unemployment Insurance, Maternity Insurance, Sickness Insurance, and Employment Injury Insurance. The Ministry of Labor and Employment has already taken steps to launch a pilot of the Employment Injury Scheme to protect workers from injury in the workplace.

Initiative to Introduce a Universal Pension Scheme

220.     In the 2008 election manifesto, Hon’ble Prime Minister Sheikh Hasina promised to introduce a universal pension scheme nationally to ensure old-age protection for the elderly citizens under a sustainable and well-organised social security framework. Accordingly, the government, in its 2015 ‘National Social Security Strategy’, proposed the creation of a comprehensive, integrated and participatory pension scheme. In my budget speech for FY2019-2020, I outlined the establishment of the universal pension scheme. Now, I am very glad to announce that the government has decided to introduce a universal pension system from the next fiscal year.

221.     Around 85 percent workforce of Bangladesh’s labour market is employed in the informal sector. As there is no institutional social security framework for the informal sector and expatriate workers, there are chances of uncertainty of livelihood at their old age. In 2000, the number of the country’s total labour force was 4 crore 7 lakh which reached 6 crore 35 crore in 2018. The number of expatriate workers in 2000 was 28.6 lakh which crossed 9 lakh in 2018. In 2020, the 60-plus population in Bangladesh was 1 crore 20 lakh, which will stand at 3 crore 10 lakh in 2041 and 5 crore 57 lakh in 2061. Currently, the expected average life expectancy is 73 years which will be 79.9 years in 2050 and 84.3 years in 2075. In the next three decades, there will be a life expectancy of 20 years even after retirement. Presently, the dependency ratio is 7.7 percent which will rise to 24 percent in 2050 and 48 percent in 2075. The aging population will continue to grow due to the expected increase in average life expectancy. In our country, the culture of societal safekeeping that prevailed in the villages for the elderly people through joint families is on the wane. The increasing tendency to live in unit families is making the safety of the elderly people increasingly threatened.

222.     It is high time to establish a universal pension system in Bangladesh as at present the number of working people is much higher than the elderly population. Under various programmes for social protection of the elderly and needy communities, our government is providing allowances to about 1.15 crore beneficiaries. Bearing in mind, the government’s election pledge, a policy decision has been taken to enact the ‘Universal Pension Management Act, 2022’ to introduce a universal pension system to ensure a sustainable social safety net for the elderly and the needy people. The law has already been drafted. After passing through all necessary formalities, it will be possible to present this important law to the National Parliament by 2022- Inshallah. The implementation of the universal pension scheme will bring a large number of citizens from both the formal and informal sectors under the institutional social safety net. Consequently, there will be an opportunity to gradually scale down the existing social security programmes.

Issuance of Islamic Shariah-based Bonds

223.     Shariah bond (Sukuk) has been introduced to allow Islamic Shariah-based banks and financial institutions to invest in government securities. The government has already formulated and implemented the necessary rules and regulations for issuing Sukuk. The introduction of the Sukuk instrument has created huge opportunities for Sharia-based banks to participate in the governmental development process. Sukuk bonds worth Tk. 8 thousand crores have been issued in FY2020-2021. Sukuk bonds worth Tk.10 thousand crore have also been issued in the current FY2021-2022. This initiative will help in consolidating the strength and scope of the bond market that will play a strong role in the progress of the country’s financial sector.

Madam Speaker

Automation of Pension

224.     iBAS++ (Integrated Budgeting and Accounting System) developed in-house is being used across all offices of civil administration, defense, and railway for preparing and implementing budgets and producing accounts. With the help of iBAS++, government employees can submit their salary bills online and receive payment of salaries through EFT. One of the major add-ons to the iBAS++ process is the payment of pensions through EFT. For this, the work of developing a database of pensioners has been completed. In addition, 100 percent of pensioners’ monthly pension has been brought under EFT. With this initiative, the wastage of government money has been prevented, and getting pensions by the pensioners has become hassle-free.

All Government Transactions Brought Under a Treasury Single Account

225.     The Government has always been active in taking timely measures to save public money and bring transparency in public spending. A Treasury Single Account has been introduced in many countries to minimise borrowing costs and streamline the management of cash resources. In Bangladesh, we have brought all government transactions under a Treasury Single Account. Apart from the government entities, all semi-government autonomous, and state-owned enterprises will be brought under the Treasury Single Account (TSA). Such measures will increase transparency in the spending of public money, and reduce the borrowing cost.

Government Cash Transfer Brought under the G2P system

226.     The government has decided to bring 100 percent payment of all social safety net allowances under the G2P system by FY2022-2023. More than 60 percent of such payments have already been brought under this system. In addition, a Uniform Social Register based on G2P has been developed in the iBAS++. Cash transfers of all social safety-net programmes including old age allowance, widow’s allowance, disabilityallowance, freedom fighter’s honorarium, maternity allowance, and educational stipend are being sent quickly in this process. Thus, we have ensured that actual beneficiaries are receiving government transfers. The process has increased the effectiveness of cash transfer programmes. Moreover, by identifying the actual beneficiaries, the government can ensure a hassle-free cash transfer at the right time.

Implementation of the Automated Chalan System

227.     To have easy access to government services easily available, we have completed the automation of the conventional chalan system for depositing money to the government treasury. The system has enabled the government service recipients to submit online chalan through debit/credit cards and bank accounts from home without any cost and hassle. Apart from this, chalan also can be submitted to any branch of scheduled banks in the country. As a result, the process of payment of fees against government services has been simplified and the harassment has been reduced. Moreover, the new system has ensured the instant deposit of money into the government treasury; on the one hand, this system has reduced the time lag in receiving government revenues.On the other hand, this has brought satisfaction of the service recipients. This system is having a positive impact on the government’s cash management.

Reforms in the Management of Sales of Savings Certificates

228.     Although the provision of the national savings certificates scheme was meant for targeted small income people, many high-income investors were taking advantage of the scheme. Hence, we automated the management of sales of savings certificates. This has reduced the scope of buying savings certificates above the individual permissible limit. Further, it has been made mandatory to provide the NID number and TIN for the purchase of savings certificates. As part of our reforms, we have reduced the profit rate by 1 to 2 percent in FY2021-2022 on investments above Tk. 15 lakh. This will reduce the government’s interest expenditure on account of savings certificates, but the interest rate benefits for the small savers people will remain intact.

Chapter Nine

Revenue Collection Activities

Madam Speaker

229.     As in the previous years, the major portion of government revenue will be collected by the National Board of Revenue (NBR). Government revenue target is set based on the size of the budget. Government revenue is collected mainly from three sources: (a) NBR tax revenue, (b) non-NBR tax revenue and (c) non-tax revenue. Almost 85 percent of total revenue is collected by NBR. Although NBR’s main responsibility is to collect revenue, with the hope of creating a just and equitable society, various exemptions, rebates and tax holidays are given in value added tax, customs duty and income tax to promote industrialization, create employment, facilitate business, protect local industries and attract foreign investment. Our revenue collection has exhibited sustained growth despite the fact that our tax-GDP ratio is comparatively low.

230.     Our revenue collection has showed a modest growth of 12.12 percent up to April 2022 in the current fiscal year despite businesses continue to be hampered by the COVID-19 pandemic. We are continuing with our revenue collection drive in FY2021-2022. The pandemic is still affecting business operation. We are trying to maintain the momentum of economic and GDP growth. Many fear that the economy may not be back to normal even in the next fiscal year. We are planning our fiscal policy taking the Covid-19 pandemic, global instability and tension in international trade and commerce into account. In consideration of the impact of COVID-19 pandemic on business, we, in this budget, have put emphasis on protection of public health, employment creation and economic recovery alongside revenue collection.

231.     The budget for the FY2022-2023 has been formulated with a view to reviving and accelerating the growth of the economy, which has been hampered by the long-term effects of the pandemic. At the same time, various measures have been taken and are planned to prepare for LDC graduation, create new jobs, sustain GDP growth, develop local industries, increase investment through protection and trade facilitation, pay special attention to development of export oriented and heavy industrial enterprises, and promote Made in Bangladesh tagline. I am now placing the proposals before this august House on import duty, vat and taxes in the budget for FY2022-2023 taking due note of the proposals received from various organizations, business associations and in consultation with the related stakeholders to safeguard the interests of localindustry, businesses and consumers.

Madam Speaker

232.     Bangladesh will soon graduate from the Least Developed Country (LDC) category. We are moving forward with the goal of becoming an upper middle-income country by 2031 and a happy-prosperous country by 2041. In this context, there is no alternative to increasing the tax-to-GDP ratio to sustain the country’s ongoing development. Tax exemption is one of the major obstacles to improving the tax to GDP ratio. Instead of giving tax exemptions, on each case, whether it is project implementation or maintenance work or purchase of essential commodities, the required amount of tax (vat, import duty, supplementary duty or income tax to be paid) should be allocated in the related office’s budget, and required taxes should be paid from that budgetary allocation. We should not issue special orders for exemptions unless there is an extraordinary situation. This will bring transparency in revenue administration and help us to manage budget deficit better. It is my firm belief that the tax-to-GDP ratio will significantly increase if the exempted tax is collected and this will accelerate the pace of Bangladesh’s development.

Madam Speaker

233.     The following factors have been considered while making proposals about customs duty, regulatory duty, supplementary duty and value added tax at the import stage:

  • Taking necessary steps to recover the economy, which is badly affected by the global COVID-19 pandemic;
  • Investment and employment generation and judicious use of foreign currency;
  • Diversification of export-oriented industries and giving incentives to the backward linkage factories;
  • Expansion and development of health, agriculture, fisheries, livestock, electronics, electronics, ICT sectors and heavy industries;
  • Improvements in ease of doing business in Bangladesh;
  • Attracting foreign direct investment to Bangladesh; and
  • Rationalization of tariff structure at import stage to protect the development of local industries and also enhancing revenue collection (including value added tax and income tax).

Madam Speaker

234.     Initiatives have been taken to provide easy and seamless services to the taxpayers, traders and citizens by automation and digitization of the Income-tax, Customs and VAT departments of the National Board of Revenue. Most of the reform measures have already been implemented by this time. Electronic payment (e-payment) system has become very popular among the taxpayers. Government revenue can now be paid online by automated treasury challlan (A-Challan) in 12 scheduled banks and offline over the counter (OTC) in 46 scheduled banks.Taxpayers can now pay taxes from home at their convenient time through their bank accounts directly at Bangladesh Bank without going to Bangladesh Bank or Sonali Bank.

Madam Speaker

235.     Domestic sources continue to be the main source of government revenue amid the current global economic instability for uninterrupted economic progress. Instead of raising tax rates initiatives are taken to bring more tax payers in the tax net, reform tax policy, expand tax-base, encourage e-TIN holders to file returns and encourage voluntary compliance. Income tax department has taken steps for submission of returns by non-filer companies. Under a joint initiative of the National Board of Revenue (NBR) and the Institute of Chartered Accountants of Bangladesh (ICAB) the Document Verification System (DVS) is successfully running to verify the accuracy of audited accounts submitted by the taxpayers. This initiative has increased transparency in income shown by the taxpayer company. National Board of Revenue (NBR) and Bangladesh Road Transport Authority (BRTA) has collaborated for exchange of information through system integration for data exchange, data pulling, data storing and data accuracy verification. As a result of this initiative, new taxpayers are being identified and unpaid taxes are being collected. E-TDS system has also been introduced to monitor tax deduction and collection at source. E-filing system has been introduced for taxpayers to file their income tax returns online. This initiative has made it easier for taxpayers to file their income tax return and the number of new taxpayers is also increasing. As a result, tax base has been strengthened, which will help Bangladesh in achieving Vision 2041.

Madam Speaker

236.     The VAT and Supplementary Duty Act, 2012 has been implemented since 01 July 2019 by simplifying value added tax act and rules to ensure international best practices and business friendly environment are promoted. To make this law more effective and online based, the VAT Online Project has been implemented successfully. Automated registration and submission of return online is a significant accomplishment of this project. VAT registration, return submission and related others activities can now be done online. More than three lakh fifty thousand taxpayers have already received new 13-digit VAT registration number online and approximately 73 percent file their returns online.

Madam Speaker

237.     A new Customs Act, 2021, incorporating international best practices, has been drafted and is now at the vetting stage. It will be placed in this august House very soon. Automation and use of ICT started in the custom administration many years ago. Web-based ASYCUDA World System is used in custom operation. ASYCUDA is connected with the computer system of Bangladesh Bank, Sonali Bank, all scheduled banks, BEPZA, CCI&E, BRTA, IATA, Chittagong Port Authority and other major stakeholders. It has helped monitoring of e-LC, container management through manifest data sharing, prevention of money laundering, dangerous cargo monitoring, and assessment of imported goods and exports. To introduce paperless customs several modernization initiatives, such as National Single Window (NSW), automation of Bond Management, introduction of Authorized Economic Operator (AEO), and establishment of Customs Risk Management Commissionerate to use risk management techniques, are underway. It is expected that successfully implementing these initiatives will speed up customs clearance and will bring dynamism in import-export trade.

Madam Speaker

238.     Several reforms initiatives are underway to increase capacity and efficiency of revenue administration. All the training academies under the National Board of Revenue are being modernized to impart effective and timely training. Expansion activities of National Board of Revenue are underway with the dual aim of improving the quality of services and increasing tax revenue collection. We firmly believe that the National Board of Revenue will be able to meet the revenue target set for the FY2022-2023 by taking advantage of effective tax policy, efficient revenue administration and with participation of all stakeholders including businessmen.

 


Chapter Ten

Income Tax, Value Added Tax and Import-Export Duty

Direct Tax: Income Tax

Madam Speaker

239.     Direct Tax or Income Tax is the internal driving force of a country’s economy and plays a pivotal role in maintaining social and economic equality in the country. At present, the share of income tax to the total tax revenue collected by the National Board of Revenue (NBR) stands at around 35 percent. Despite the outbreak of COVID-19 pandemic, income tax recorded an average growth rate of 16 percent or above in recent years, and this growth is continuously maintaining an upward trend. Considering 2013 as the base year, the growth recorded in tax base is 574 percent which is expected to improve even further through the policy initiatives proposed in this budget. Analysis of the context, facts and figures of different countries of the world reveals the growing tendency of multi-faceted financial and social inequality among the citizens as an outcome of economic growth in a society or a country. The main objectives of income tax are to ensure reduction in income inequality and establish social justice by providing adequate revenue for the overall development of the country, ensuring macro-economic stability, bringing discipline in public financial management through redistribution of wealth with a view to establishing a welfare state. Formulating a welfare-oriented and people-friendly income tax law is one of the important tools in achieving these objectives. Bangladesh has become a role model to the world, which is badly battered by COVID-19, for her success in addressing the damage to the economy caused by the pandemic and in promoting social and economic development. In the proposed budget, policy initiatives have been undertaken with a view to mitigating the damage to the economy caused by the post COVID-19 global unrest, as well as adopting business and investment friendly tax policy, ensuring proper enforcement of tax law, dissipating social and economic inequality and promoting ICT-friendly policy.

Madam Speaker

240.     Since taking charge in 2009, the present government has constantly been pursuing a taxpayer, business and investment friendly policy in collecting taxes to establish a strong tax culture in the country. The essence of this policy is to gradually ease the tax burden by increasing investment and tax-to-GDP ratio in the economy, and also by motivating the taxpayers for better tax-compliance. You are well aware that the tax-free income ceiling for individual taxpayers, which was Tk. 1 lakh 65 thousand in FY2009-2010, has been increased from time to time to bring it to the tune of Tk. 3 lakhs in FY2020-2021. This ceiling has been kept unchanged in the following fiscal year. The tax-exempt income ceiling is even higher for females, senior citizens, physically challenged people, members of the third gender, and freedom fighters, who were wounded in the war. The tax rate of non-listed companies in the stock market has gradually been brought down to 30 percent in FY2021-2022 from 37.5 percent in FY2009-2010. This issue has also been considered in the proposed budget for FY2022-2023, deliberations on which shall be covered in the later part of my speech. Also, in light of this policy, the tax rates of companies listed in the stock market and banks, insurance companies and financial institutions have been gradually reduced from 27.5 percent to 22.5 percent and 42.5 percent to 37.5 percent respectively between FY2009-2010 till date. Adoption of this apt policy by the government not only acted as a great incentive for the taxpayers to be compliant but also positively influenced investment and employment generation to increase in the country.

Madam Speaker

241.     At this point I am presenting before this august House some important proposals relating to income tax for the FY2022-2023.

Madam Speaker

242.     The present ratio of private investment to GDP in Bangladesh stands at 23 percent. The government has taken different initiatives to increase this ratio with a view to developing to the status of a developed country. The desired target for private investment to GDP ratio can be achieved by reducing corporate tax rate. A tax rate commensurate with the ongoing business-friendly policies of the government will play a vital role in expanding trade and commerce as well as establishing a pro-tax culture. Predominance of cash transactions in the economy is a great hindrance for collecting revenue. Curbing the multitude of cash transaction through the effective use of ICT and adopting necessary legal steps to this effect will result in increase of revenue collection and at the same time open up a new horizon towards establishing a Bangladesh based on social justice, equality and welfare. Considering all these, and with a view to facilitating rapid expansion of trade and commerce, the corporate tax rate has been reduced from 32.5 percent to 30 percent through Finance Act 2021. In FY2022-2023, I would like to propose a further reduction of the existing corporate tax rates. In this case, all receipts and income must be transacted through bank transfer and all expense and investment over Tk. 12 lakhs must be made through bank transfer. Here, I propose to reduce the tax rate for non-listed company from 30 percent to 27.5 percent. Also, to facilitate formalization of the economy and to incentivize formation of One Person Company (OPC), I propose to reduce the tax rate for OPCs from 25 percent to 22.5 percent. For the sake of development of the stock market and attracting investments, I propose a tax rate of 20 percent in place of existing 22.5 percent for listed companies that issue shares worth more than 10 percent of its paid up capital through Initial Public Offering (IPO). I, however, propose the tax rate to be 22.5 percent for a listed company that issues shares worth ten percent or less than ten percent of its paid up capital through IPO. But in this case, the tax rate would be 25 percent instead of 22.5 percent if the company fails to comply with the conditions mentioned earlier.

Madam Speaker

243.     I propose the following corporate tax rate for FY2022-2023 applicable for taxpayers other than individuals.

Tax rate for company and others:

Description

Existing 2021-2022

Proposed 2022-2023

*applicable tax rate if fails to meet the condition

Publicly traded company that issues shares worth more than 10 percent of its paid up capital through Initial Public Offering (IPO)

22.5%

20%

22.5%

Publicly traded company that issues shares worth ten percent or less than ten percent of its paid up capital through IPO

22.5%

22.5%

25%

Non-publicly traded company

30%

27.5%

30%

One Person Company (OPC)

25%

22.5%

25%

Publicly traded bank, insurance and financial institution (except merchant bank)

37.5%

37.5%

Condition not applicable

Non-publicly traded bank, insurance and financial institution

40%

40%

Condition not applicable

Merchant bank

37.5%

37.5%

Condition not applicable

Company producing all sorts of tobacco items including cigarette, bidi, chewing tobacco and gul

45% + 2.5% (surcharge)

45% + 2.5% (surcharge)

Condition not applicable

Publicly traded mobile operator company

40%

40%

Condition not applicable

Non-publicly traded mobile operator company

45%

45%

Condition not applicable

Association of persons

30%

27.5%

30%

Artificial juridical person and other taxable entity

30%

27.5%

30%

Private university, private medical college, private dental college, private engineering college or private college solely dedicated to imparting education on ICT

15%

15%

Condition not applicable

*Condition: All receipts and income must be transacted through bank transfer and all expense and investment over Tk. 12 lakhs must be made through bank transfer.

Madam Speaker

244.     The present government is determined to simplify processes to make doing business easy and to promote business-friendly environment. Noteworthy that the existence of varied rates of tax at source on different types of supply causes excessive effective tax burden for business people in certain cases. With a view to mitigating this issue, I propose to reduce the rate of tax at source on supply of trading goods from 7 percent to 5 percent, and on supply of books, except government supply, from 7 percent to 3 percent. In order to reduce the cost of production in industries, I propose to cut the rate of tax at source on supply of raw materials to manufacturers from 7 percent to 4 percent.

Madam Speaker

245.     One of the objectives of tax policy of the present government is to expand the tax net on one hand and gradually rationalize the tax rate on the other. As part of this policy, I propose to reduce the rate of tax at source from 12 percent to 10 percent on certain services rendered by a resident taxpayer. In addition, I propose 5 percent tax at source on gross bill of terminal operation/ ship handling, as part of port operations, similar to that on stevedoring/ berth operation commission.

Madam Speaker

246.     Economic integration, formalization of the economy and ease of tax compliance are of utmost importance to national economy. To this end, I make the following proposals:

  1. To fix the rate of investment tax rebate at 15 percent on eligible amount;
  2. To keep service charge of mobile financial services out of tax deduction at source;
  3. To introduce the provision of amortization of pre-commencement expenditure of business as this cannot be claimed as allowable expense under the existing law;
  4. To define ‘Research and Development’ and to make it an allowable expense as no clear provision to allow this expense exists in the prevailing law;
  5. To raise the present allowable ceiling of perquisite from Tk.5,50,000 to Tk. 10,00,000;
  6. To make provision of disallowance of the contribution made to Workers’ Profit Participation Fund (WPPF) by a company as an expense. As per Bangladesh Labor Act 2006, provision is there to make contribution to the WPPF, and this is payable from the after tax-profit of a company;
  7. To consider the special reserve of financial institutions as non-admissible expenditure in light of the existence of clear provisions in the tax law regarding set-off and carry forward of loss.
  8. To include hotels, resorts, community centres and transport agencies as tax deducting/collecting authorities with a view to expanding the tax net;
  9. To fix a uniform tax rate for income derived from poultry, hatchery and fishery.

Madam Speaker

247.     The present government is relentlessly working to integrate the marginal and the underprivileged population of the country into mainstream economy. The physically challenged people and people of third gender constitute a large part of the marginal and underprivileged section of the society. Compared to others, these people are lagging behind in socio-economic standards, and are also left outside the mainstream of society. Social inclusion of this population can be ensured by engaging them in productive employment. Against this backdrop, with a view to providing employment and giving better living standards and ensuring social and economic inclusion of the physically challenged and people of third gender, I propose in this august House to further expand the existing tax incentives provided to them. Under the present provisions, an employer is allowed 5 percent rebate on payable tax if at least 10 percent of the total workforce is recruited from physically challenged population. Also, tax rebate to the tune of 75 percent of the total salary paid to the workers from the people of third gender or 5 percent of the tax payable, whichever is less, is allowed to an employer employing 10 percent or more than 100 persons of the total workforce from the people of third gender. I propose to amend both the existing provisions to make it such that if any employer employs 10 percent or more than 25 persons from the physically challenged or the third gender community, the employer will be entitled to get 75 percent of the salary paid to these people or 5 percent of the tax payable, whichever is less, as tax rebate.

Madam Speaker

248.     This is the age of information and communication technology (ICT). The present government is putting special emphasis on the ICT sector. With a view to facilitating the endeavor of the government to build a digital Bangladesh in all its dimensions, start-up initiatives should be supported by providing special incentives. I propose to exempt the start-up businesses from the bindings of all other types of reporting except submitting income tax return, and to allow start-up companies to set off and carry forward losses over a period of nine years. Also, to allow the start-up entrepreneurs competitive advantage to expand their business in the global arena, I propose to withdraw the restrictions on expenditure and fix the rate of turn over tax at 0.1 percent in place of 0.6 percent.

Madam Speaker

249.     The outbreak of Corona virus and the ongoing unstable condition in certain parts of the world forebode a recession in the global economy. Under the circumstances, we might have to face tough challenges in the coming fiscal year. As such, we have to be more prudent and visionary in adopting and implementing fiscal policy. To keep the economy going, we have to arrange for more revenue for the government expenses on one hand, and also have to make the economic activities in the private sector more vibrant and dynamic on the other. I, therefore, propose to add a new provision in the Income Tax Ordinance, 1984 so that money earned and asset acquired abroad can be mainstreamed into our economy with a view to creating a flow of fresh fund and investment for economic activities. According to the proposed provision, no authority, including the income tax authority, shall raise any question as to the source of any asset located abroad if a taxpayer pays tax on such asset. The proposed rate is 15 percent for immovable property not repatriated to Bangladesh, 10 percent for movable property not repatriated to Bangladesh and 7 percent for cash and cash equivalents repatriated to Bangladesh. This opportunity will be in force for the period starting from the first day of July 2022 and ending on the thirtieth day of June 2023. The proposed provision, when implemented, will increase the flow of foreign currency to our economy, increase income tax revenue, and the taxpayers will also feel relieved by availing this opportunity to declare their assets and money acquired/earned abroad in their respective income tax returns.

Madam Speaker

250.     Galvanized iron sheet or steel products are one of the major raw materials used in construction of physical infrastructure and also used in the Ashrayan Project of the government. Providing tax benefit to the industries engaged in manufacturing such products will make construction of physical infrastructure and implementation of the Ashrayan Project more cost-effective and easier. In this context, I propose to reduce the rate of tax from 5 percent to 3 percent on import of HR coil and zinc, raw materials used for manufacturing galvanized iron sheet or steel products.

Madam Speaker

251.     The Gold Policy-2018, which came into force on October 29, 2018, was made with a view to increasing government revenue by bringing the gold sector of the country within a regulatory framework. This has created some private entrepreneurs, who are interested to import gold through the proper channel adhering to government rules and regulations. I propose to withdraw advance tax on import of gold with a view to encouraging import of gold through formal channel and discouraging gold smuggling in the country. This will hopefully lead to much growth of the jewelry industry in the country and increase tax revenue collection.

Madam Speaker

252.     Globally Bangladesh has retained second position in export of RMG. The tax policy of the government provided support in making this industry competitive internationally. In order to retain this achievement and to get expected revenue from this sector, the incentives granted to the textile sector need to continue. The prevailing tax rate for the textile sector stands at 15 percent, and the SRO to this effect expires on June 30, 2022. I propose to extend this facility until June 30, 2025. I believe the valued taxpayers will take advantage of this long-term preferential tax benefit and will feel encouraged to pay their due taxes.

Madam Speaker

253.     It is expected that bringing discipline in the public financial management by reforming revenue policy and rationalizing the tax rate for the private sector will reaffirm our advancement in different economic indicators. At present bad debt that is writing off by a bank or financial institution is tax exempt for all taxpayers. I propose that bad debt that is written off for all types of taxpayers, except for individuals, is considered taxable income for the concerned loan defaulter. Also, as per existing provision, the capital gain earned from government securities is kept out of the purview of taxation. In line with other securities, I propose to make such capital gain taxable. In pursuit of rationalizing the prevailing tax rate for the private sector, I propose to consider the tax collected from import of beverage concentrate, export of services, operation of inland ships and commercial vehicles as minimum tax.

Madam Speaker

254.     Compared to other developing and developed countries, the tax-GDP ratio of Bangladesh is not that encouraging. It is essential to raise our tax-GDP ratio significantly in order to support our graduation to a developed country. We need to expand the tax net by bringing all eligible citizens of the country within the tax net, which in turn will enhance our capacity to tap more revenue and expand the size of the formal economy. I propose the following legal provisions for submitting income tax returns with a view to expanding the existing tax net:

a)   To mandatorily present proof of submission of return (PSR) in certain cases;

b)   To submit income tax return of all funds except recognized provident fund, approved gratuity fund, pension fund, approved superannuation fund and workers’ profit participation fund;

c)   To make submission of income tax return mandatory for schools under Monthly Payment Order (MPO) that have introduced English version in their school;

d)   To expand the provision of spot assessment at all levels beyond the growth centres;

e)   To introduce the provision of realizing undisputed arrear tax demand from the directors of a company if the operation of such company remains suspended for three consecutive years or more;

f)   To introduce provision of disconnecting utility service connections, such as gas, electricity, water etc., in case of failure to pay the undisputed revenue demand of the government.

Madam Speaker

255.     One of the major challenges in tapping revenue in this era of globalized economic activities is to collect proper taxes from non-resident taxpayers and digital service providers, and to make them follow the rules and regulations strictly. With a view to collecting expected revenue from non-residents in Bangladesh, I propose to withdraw the provision of exemption from submission of income tax return for those not having any permanent establishment in Bangladesh. I also propose that NBR formulate proper rules defining the scope and areas of income and exemption of non-residents to ensure proper collection of revenue from them. Also, I propose to make presenting proof of submission of return a mandatory provision in cases where income arises to a person from Bangladesh through digital presence.

Madam Speaker

256.     Deduction at source is regarded as the foundation of income tax collection.The same is true for our country too. Therefore, rationalizing the rate of source tax carries immense importance in formulating revenue policy. In view of this, and in line with the existing corporate tax rate, I propose to raise the rate of source tax on bank interest for company taxpayers to 20 percent from that of 10 percent, and to raise the rate of source tax on export proceeds to 1 percent from that of 0.5 percent. Also, to support materializing our dream of building a digital Bangladesh, I propose to reduce the rate of source tax on the payments made to non-residents on account of bandwidth payment to 10 percent from 20 percent. With a view to discouraging making payments of bills to non-residents through illegal channels, except for certain services, I propose to reduce the rate of collecting source tax from the other non-scheduled payments to be paid to non-residents from 30 percent to 20 percent. Also, to expand the scope for collecting source tax, I propose to impose 5 percent source tax on lease rent of water bodies except for the ones owned by the government.

Madam Speaker

257.     Export is the main source of foreign currency for the country. Export business plays a vital role in achieving economic prosperity. In order to increase the contributions of the export sector to our GDP, long-term tax incentive have been granted to goods ‘Made in Bangladesh’ and services in the last fiscal year. As a continuation of that effort, initiatives should be taken to create new export sectors, to diversify goods and to search for new export markets so that ‘Made in Bangladesh’ can be made a global brand. Also, service export should be given due priority alongside goods export. As a part of this initiative, I propose to include export of services in the definition of export in tax statute. I also propose to exempt the income earned in foreign exchange by ocean going vessels carrying Bangladeshi flag from paying tax until 2030 provided the income is brought to Bangladesh through banking channel. By adopting these proposals, we will be able to establish service export as a potential export industry for earning foreign currency for the country. The prevailing tax rate for the export oriented RMG sector stands at 12 percent for general factories and 10 percent for green factories. With a view to encouraging diversification of export goods and ensuring a level playing field for all other sectors exporting goods and services, I propose to introduce 12 percent tax rate for all other general industries exporting goods and services and 10 percent for all other green industries exporting goods and services. This sort of export-friendly initiative will bring down trade deficit with other countries. As a result, deficit in current account, a major economic indicator, will be minimized.

Madam Speaker

258.     In her journey towards continued growth and development, Bangladesh has already achieved middle-income status. We are dreaming of becoming a developed country by 2041. In order to continue this development trend, adequate revenue collection, especially from direct taxes, is an essential prerequisite. Collecting adequate revenue from domestic sources to fund the development expenses has been set as a major SDG target. In this connection, with a view to establishing a modern, state of the art, ICT-backed and effective tax system based on international best practices, initiatives taken by the Government to reform, expand and reorganize the Income Tax Department are ongoing. We hope to complete the ongoing reform and expansion initiatives by FY2022-2023.

Madam Speaker

259.     If the proposals placed in the budget are properly implemented, the economic activities in Bangladesh will get new momentum, foreign remittance inflow will increase with growth in the export sector, tax net and formal economy will expand, new entrepreneurs will emerge, employment opportunities will broaden, foreign investment will increase, and investment and business friendly environment will be ensured. As a result, tax base will be strengthened, which will ultimately take Bangladesh a big step closer towards achieving the Vision 2041.