The government plans to downsize corporate tax for the Covid-19-hit entities in the coming fiscal year 2021-22 (FY22) as a gift of “Mujib Year” following a directive from Prime Minister Sheikh Hasina.
Sources said the Finance Ministry is going to take such steps at the directive of the Prime Minister as rationalization of corporate tax is a long time pending demand of the country's trade bodies which thinks that such tax cut would help boost investment in the country.
Corporate tax is likely to be set at 30 percent from the existing 32.5 percent for non-listed companies and at 22.5 percent from 25 percent for the listed ones, said an official of the National Board of Revenue (NBR).
However, the tax rates for other sectors, including the individuals, will remain unchanged, he said.
"It is yet to be finalized . . . we're working on it. We will send a proposal to the Prime Minister's Office (PMO) for final decision about it," said an additional secretary of the Finance Ministry.
Like other sectors, listed and non-listed production-oriented companies have suffered a lot due to Covid-19 and downsizing of corporate tax would create a breathing space for them, said the NBR official
"We need revival of the Covid-19 hit economy. So we are focusing on attracting more investment in the country and it is a prime target of the coming budget. Slashing of corporate tax by 2.5 percentage points would be good enough for encouraging investment," said the Finance Ministry official.
Leading trade bodies, including Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), Dhaka Metropolitan Chamber of Commerce and Industry (MCCI) and Dhaka Chamber of Commerce and Industry (DCCI), demanded downsizing the corporate tax during their pre-budget consultations with the NBR recently.
The trade body leaders claimed that cutting corporate tax would boost investment that would ultimately generate new jobs as well as revenue earnings.
Business Initiative Leading Development (BUILD), Bangladesh Export Procession Zones Authority (BEPZA), Bangladesh Economic Zones Authority (BEZA), Bangladesh Investment Development Authority (BIDA) also recommended slashing of corporate tax in the coming budget.
BUILD Chairperson Abul Kasem Khan said for increasing the Tax GDP ratio, the existing ratio of direct and indirect tax which is around 35:65 should be reversed to uphold the interest of the consumers and the productive sectors.
Rizwan Rahman, DCCI President said slashing of corporate tax would help the business community to survive during the adverse situation caused by Covid-19.
He described Prime Minister Sheikh Hasina as a friend of the private sector and said the premier has taken a series of measures, including stimulus package, to support private section amid the pandemic
"Not only the local investors, reducing corporate tax rate would also help attract foreign investors," said the DCCI president.
Currently, corporate income tax rate is 37.5 per cent for banks, insurance companies and other financial institutions that are listed with the capital market, 40 per cent for non-listed banks, 37.5 per cent for merchant banks, 45 per cent for tobacco companies, 45 per cent for non-listed mobile phone operators, and 40 per cent for listed mobile phone operators, 15 per cent for cooperative entities, and 12 per cent for export-oriented ready-made garment factories.
Also, individual tax rates range from minimum 5.0 percent to maximum 25 percent, which might remain unchanged in the budget.
The existing tax-free ceiling of Tk 3,00,000 for individual taxpayers might also remain unchanged.
Tax-free threshold is Tk 3,50,000 for women and senior citizens, Tk 4,50,000 for physically challenged people, and Tk 4,75,000 for gazetted war-wounded freedom fighters.
