The government is still in a dilemma over rationalising the corporate tax rates in the budget for the upcoming fiscal year (FY) fearing a significant loss in revenue collection with cutting of higher slabs.
The National Board of Revenue (NBR) may consider cutting of tax rates for non-listed companies but is unlikely to slash the higher slab of 42.5 per cent rate, officials said.
A senior tax official said the government is likely to bring down the tax rates for non-publicly traded companies to 35 per cent from existing 37.5 per cent.
"Revenue loss will not be significant on a cut in the tax rates for non-listed companies but it will be quite impossible to slash higher slab," he said.
The NBR estimated loss of some Tk 5.0 billion income tax in a year with a cut in tax rates for banks, non-banking financial institutions and other companies.
Officials said the rates of revised corporate tax rates might take a final shape following a meeting with the Prime Minister (PM) on next Sunday.
On upward revision of tax-free limit for individual taxpayers, the official said the NBR has proposed not to revise the ceiling this year.
He, however, said the final decision on increasing the ceiling depends on instruction of the government high-up.
The revenue board will have to collect the highest amount of income tax, some Tk 600 billion, for the first time among the three wings of NBR.
"We are finding new avenues of increasing income tax collection. Majority of the non-listed companies are not paying income tax and these declare themselves as losing concerns in the tax returns," he added.
A cut in tax rates might encourage them to show actual income to the taxmen, he said.
Both the finance minister and the chairman of the NBR several times hinted a cut in the corporate tax rate as it is one of the highest among the neighbouring countries.
The top tax officials last Sunday held a meeting with Prime Minister Sheikh Hasina over their respective budget proposals for income tax, Value Added Tax (VAT) and Customs duty.
Sources concerned said the PM instructed the NBR to prepare an outlay on cut in corporate tax rates with the estimation of revenue loss with rationalisation.
Officials said the PM was initially against a cut in corporate tax rates but later she felt the necessity for attracting investment in the country.
However, there is a strong recommendation from businesses for lowering corporate tax rates while economists are opposed to the proposal.
The apex chamber body Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) and the Metropolitan Chamber of Commerce and Industry (MCCI) have proposed to cut corporate tax rates.
The rate of corporate tax is highest in the neighbouring and other Asian countries.
Md Humayun Kabir FCA, convener of the income tax-related subcommittee of the FBCCI, said high corporate tax discourages accumulation of funds in corporate sector.
"There is a wide gap between individual and corporate tax rates. Individual taxpayers enjoy a total tax incidence of 29 per cent while it is 37.5 per cent for corporate bodies," he added.
Dr Binayak Sen, senior research fellow of the Bangladesh Institute of Development Studies (BIDS), however, opposed the move for corporate tax cut as other tax instruments are not working properly to generate revenue.
The government received an insignificant amount of Tk 1.30 billion from surcharge on wealth above Tk 20 million, he added.
Dr Sen proposed introduction of wealth tax at 1.0 per cent on net wealth of people as many of the assets need revaluation.
Government in a fix over rationalising corporate tax rates in budget
Doulot Akter Mala | Published: May 21, 2014 00:00:00 | Updated: November 30, 2024 06:01:00
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