FY23 budget: further reduction of the corporate tax rate in sight
Currently, listed companies are subject to corporation tax at 22.5%, while unlisted companies are expected to pay tax at 30%.
A senior source at the National Board of Revenue, or NBR, confirmed to bdnews24.com that a 2.5% corporate tax cut for listed and unlisted companies has been proposed in the next fiscal budget proposal.
This essentially means that if this proposal comes into force, listed companies will have to pay corporation tax at the rate of 20% while unlisted companies will be taxed at 27.5%.
“Although there is a high risk of a sharp decline in revenue collection if corporate tax rates are reduced, given the current economic climate, this strategy has nevertheless been adopted to attract local direct investment or foreigners,” said the official, who has since requested anonymity. he was not authorized to reveal information in an official capacity.
If the Parliament approves the proposal, companies in Bangladesh will experience such a reduction for the third consecutive fiscal year, as each time in the previous two fiscal years, the NBR has reduced corporate tax rates by 2.5%.
CURRENT CORPORATE TAX STRUCTURE
Under the existing corporate tax structure, the corporate tax rate on listed banks and insurance companies is 36.50% and while unlisted banks, insurance companies are taxed at 40%.
Investment banks pay corporation tax at 36.50%.
In addition, companies that produce products harmful to human health – such as cigarettes, bidis, chewing tobacco and other tobacco products – are subject to a tax rate of up to 45%.
Listed mobile operators pay taxes at 40% while unlisted operators are charged at 45%. Co-operative societies, private universities and medical schools are subject to a 12% tax.
Eco-friendly and compliant apparel businesses are subject to a 10% tax, while general businesses are levied at 12%. Textile companies pay a corporation tax of 15%.
BIG CORPORATIONS NEGOTIATE FOR MORE
Big companies welcomed the move to cut corporate tax further, but still pointed out that even after the cut, the rate is still the highest in South Asia.
In this exercise, however, businessmen have put a different type of tax in their sights.
Big business has long railed against pre-tax and pre-tax income tax rates, saying they prevent local industries from thriving and make Bangladesh a less attractive place for foreign direct investment.
Withholding tax and withholding income tax is a type of tax levied on imported goods for commercial purposes only. It was introduced in 2006 to place unregistered importers under the tax net.
Md Jashim Uddin, chairman of FBCCI, the country’s premier business association, told bdnews24.com that they would prefer a complete withdrawal of withholding income taxes, rather than just a reduction in corporate tax rates. companies.
“We welcome the decision to reduce corporate tax. But for us, withholding tax on income has become a relevant issue,” he said.
“The BNR collects revenue in the name of withholding tax and withholding income tax, which it is supposed to adjust later while we submit tax returns. This rarely happens. We [businesses] find such management inconvenient”, added the president of the FBCCI.
Zaid Bakht, research director at the Bangladesh Institute of Development Studies, partially agrees with the companies on the handling of the advance tax adjustment, but he has vetoed its complete withdrawal.
Calling withholding tax and withholding tax on income important sources of revenue collection for the government, he insisted on ensuring transparency in tax management itself.
“It’s like a debt to the government and when it comes to debt, the government pays little attention to it. They have to make transparent the whole process of adjusting the money they receive from companies as than withholding tax,” he said.
[Written in English by Adil Mahmood]