The caretaker government Monday proposed a Tk 545.00 billion tax revenue target from sources coming within the purview of the National Board of Revenue (NBR), incorporating a number of new fiscal measures to enhance tax-base in the fiscal 2008-09.
The projected tax revenue is 54.5 per cent of the total development and non-development budget outlay, amounting to Tk. 999.62 billion for the forthcoming fiscal, beginning from July 01, 2008.
Revenue collections from Value Added Tax (VAT) have been estimated at around 37.1 per cent, from import duty at 19.9 per cent, income tax, 24 per cent, supplementary duty, 17.5 per cent and others, 1.5 per cent, of this aggregate target.
The revenue earning target for current fiscal 2007-08 from NBR sources was originally fixed at Tk. 438.50 billion.
Following the satisfactory trends of revenue collection for the first 10 months of the current fiscal year, the annual target has been raised to Tk. 459.70 billion under the revised budget for the outgoing fiscal.
The projected target for fiscal 2008-09 is 18.6 per cent higher than the revised revenue earning target for fiscal 2007-08. Out of this total target, the expected yield of Tk. 130.54 billion is from income tax, Tk. 225.36 billion from duties and taxes at import stage, Tk. 183.54 billion from domestic VAT & supplementary duty, and Tk. 5.56 billion from other taxes and duties.
In his budget speech, Finance Adviser Mirza Azizul Islam announced measures like the opportunity to declare undisclosed legal income with the payment of 7.0 per cent penal tax in addition to the normal tax rate and continuation of tax holiday for the newly set-up industries. He proposed to keep tax threshold unchanged at an annual income of Taka 150,000, excepting for senior tax payers as well as female tax-payers. Furthermore, his new fiscal proposal -- the withdrawal of tax collection at a fixed ratio of gross profit, irrespective of losses and profits of enterprises -- is aimed at meeting the long-felt need of businesses.
The opportunity to declare undeclared income will remain in force from July 01, 2008 to October 31, 2008.
The new budget proposes to lower high penal rate for detection of the undeclared income to 10 per cent, from existing zero to 250 per cent, for general taxpayers and up to 500 per cent for self-assessment taxpayers.
"At present, penal actions for detection of undisclosed income are quite elusive and harsh. Currently, one is subject to a fine starting from zero to a maximum of five times of the evaded tax. I propose to revise the provision of imposing this fine at a fixed rate of 10 per cent for each year of tax evasion," Mirza Aziz said.
The existing limit for tax-exempted income, tax rates and income slabs for individuals will remain unchanged for the upcoming fiscal year as the limit for tax-free income was considerably raised in the last fiscal year, he added.
But for female tax-payers and senior tax-payers with their ages exceeding 70, the finance adviser proposed to raise the limit for tax-exempted income to Tk. 165,000.
Under the proposed budget, the industries that will be set up between July 01, 2008 and June 30, 2011 will get tax holiday facility, al beit in a modified form.
"Keeping the existing sector under tax holiday intact, I propose to include agro-processing, diamond cutting, steel production from billet, jute industries, different units of textile sector, underground rail, monorail, telecom infrastructure except mobile phone," the finance adviser said in his budget speech.
Among the major fiscal proposals, the finance adviser announced the withdrawal of the provision of payment of tax on the basis of turnover of business, irrespective of profits and losses.
"Currently, according to Section 16CC of the Income Tax Ordinance, all companies, irrespective of profit or loss, have to pay a minimum tax on the basis of their turnover which is clearly in breach of the fundamental principles of Income Tax. I propose to rescind this Section," Mr. Islam said.
The finance adviser also proposed to revise the tax rate for companies listed for public trading from 30 per cent to 27.5 per cent and for companies not listed for public trading to 37.5 per cent from 40 per cent.
The 45 per cent rate for banks, insurance, financial institutions and mobile phone operators will, however, remain unchanged.
For corporate tax-payers, Mirza Aziz proposed imposition of income tax on dividend income in accordance with the applicable scheduled rates for companies, instead of existing 15 per cent.
He proposed to withdraw the existing provision of tax exemptions on incomes of foreign nationals working in Bangladesh as technicians.
Furthermore, he said the withdrawal of the provision of deduction of Tk 1000 by the city corporations as tax at source at the time of fresh issuance of trade licence, has been proposed.
"It is not justified to collect a business tax prior to the commencement of any business," he said.
"I propose to collect the tax at the rate of Tk. 500 only for renewals of trade licence by all City Corporations and Municipalities," Mr. Islam said.
Besides, the new fiscal proposals include deduction of taxes at source, at the rate of 3.0 per cent, by the bill paying companies and statutory bodies against the bills payable for advertisements published in newspapers or periodicals or telecast on private TV channels.
The proposals have also been made for deduction of taxes at source by the rent paying companies and statutory bodies against the monthly rentals exceeding Tk. 15,000 on account of open space and machinery. Currently, income of insurance agents exceeding Tk. 40,000 is subject to 7.5 per cent tax deducted at source. The rate has been proposed for reduction to 3.0 per cent up to any amount of insurance commission.
The tax-exempted income limit for persons having no income other than agricultural income has been proposed to be raised to Tk 50,000 from Tk. 40,000.00, in addition to the normal tax-free threshold.
"This will ensure that persons having only agricultural income shall not be subject to payment of taxes for an income of up to Tk. 200,000.00 and this tax free income limit would be Tk. 215,000.00 for female tax-payers and elderly people exceeding 70 years of age who have only agricultural income," Mr Islam said.
Mr Islam also proposed to extend the current tax exemption period by another three years from July 01, 2008 to June 30, 2011 for income from farms engaged in fisheries, poultry, cattle breeding, dairy, mushroom cultivation, silk worm production, seed production, marketing of locally produced seeds sectors and income generated from cultivation of flowers and plants etc.
Under the new tax proposals, agro-processing industries will be included in the list of industries enjoying tax holiday.
Furthermore, the proposal has been made to exempt any income generated from constructions of multi-storied buildings in areas outside the areas of the City Corporations, Cantonment Board, Municipalities of district headquarters, Municipal Areas under Dhaka district, from tax for the next 10 years.
The finance adviser has also proposed to exempt the income of the manufacturing small and medium enterprise (SME) entities from taxes by defining the SME as entities having an annual turnover not exceeding Tk. 2,400,000.
The income stemming from exports of handicrafts has also been proposed to be kept outside the purview of taxes from July 01, 2008 to June 30, 2011.
All incomes emanating from computer software development, data processing, data entry and call centre, have been proposed for giving tax free facility from July 01, 2008 to June 30, 2011.
The entire telecom infrastructure sub-sector, with the exception of mobile phone, will come under the purview of tax holiday under the new fiscal proposals.
Furthermore, the regulation on accelerated depreciation which was to end on 30 June 2008 has been proposed for continuation until June 30, 2010.
About tax now deducted at source for house rent exceeding Tk.15,000.00 per month, the proposals have been made for raising the limit.
"With this new limit in effect, deduction at source will not be applicable for house rent not exceeding Tk.20,000", the finance adviser said.
The finance adviser also proposed to continue the provision about the imposition of income tax at a discounted rate of 15 per cent on textiles and jute sectors from July 01, 2008 to June 30, 2011.
To recognise payment of taxes as a symbol of high social prestige, three highest tax-payers and two longest paying tax-payers from each district every year will be honoured. The process will be executed on the basis of a pragmatic policy guideline, the finance adviser noted in his budget speech.
To modernise the revenue administration, Mr Islam proposed for necessary reforms, expansion and reorganisation of the administrative structure of Income Tax, Value Added Tax and Customs Departments.
