MCCI recommendations on corporate, individual taxes

FE Team | Published: April 26, 2014 00:00:00 | Updated: November 30, 2026 06:01:00

The Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka, at a pre-budget discussion meeting with the National Board of Revenue (NBR), a rather routine annual event, held last Sunday, made two tax-related recommendations that would go well with the people at large and the businesses in particular. The MCCI wanted the government to reduce the corporate tax rate across the board and raise the tax exemption limit for individuals. The proposals do deserve serious attention, not from the narrow perspective of revenue collection but from the broader context of citizens' interests and the country's sustained economic growth.
The MCCI suggested varying tax concessions for individual taxpayers, including women, senior citizens and physically challenged ones, taking into consideration the unabated hike in the cost of living. The government raised the tax exemption limit in the budget for the current fiscal (2013-14). Given the likely size of the proposed budget for the next fiscal, the government might not be interested to raise the exemption limit in the case of individual taxpayers. But such a stance would prove to be a bit harsh for the taxpayers who belong to the category of fixed-income middleclass.
The government cannot ignore the hike in the cost of living since the presentation of the budget by the finance minister in parliament for the current fiscal in June last year. Nor should it turn a blind eye to the erosion in actual return from the investment that many elderly people and women have made in savings instruments. The real rate of return on savings instruments remains low or negligible if one takes into account the rate of inflation which has been above the projected level during the past nine months of the current fiscal.
The MCCI proposal concerning the corporate tax cut does also merit a serious attention of the government for the sake of encouraging new investments, both local and foreign, in the economy. This is also more so in the regional context in consideration of the fact that the corporate tax rate in Bangladesh is at the highest level among the South Asian countries and also compared to most not-too-far South East Asian economies. Furthermore, the overall investment situation in Bangladesh has otherwise been depressing for more than a couple of years. There is no denying that the corporate tax-rate cut would benefit the existing companies, both listed and unlisted ones, financially. But it would definitely encourage new investments. A dispassionate look at the corporate tax structure now in force in the country would help the policymakers to understand how tax rates in comparative regional perspectives have been hurting investment here.
Obviously, the government needs money to meet its development and recurring non-development expenditures which have also been rising unabatedly. However, exploitation of different sources of revenue has not been balanced and efficient. Revenue income from individual taxpayers has remained well below the potential and the same from the import duty stagnated. The only silver lining has been the value added tax (VAT). However, with a view to meeting an ever-ballooning public expenditure, the government has, in fact, overexploited the existing sources of corporate tax earnings. Indications are there that the government might lower corporate tax rates in the coming budget. But the cut needs to be a meaningful, not just a token, one.
The raising of the tax exemption limit and a cut in corporate tax rate might otherwise lead to a decline in the government's revenue earnings from existing sources. But this loss will, in all likelihood, be more than compensated by additional tax-revenue earnings, generated by expanded economic activities that would be fuelled by increased investment and expanded demand. Of course, the taxmen would, at the same time, require to be more serious about plugging the holes in the taxation system and thus expanding the tax net to help curb tax evasion of all types.