A major shift in the government's fiscal plan is underway as Prime Minister Tarique Rahman has instructed the authorities to drop several proposed tax measures, including the introduction of a wealth tax and a facility for whitening undisclosed money.
The government has also decided not to impose new taxes on motorbike owners and battery-run rickshaws, official sources confirm.
A senior tax official said on Wednesday the prime minister had ordered the withdrawal of those proposed measures to provide relief for the people already struggling with persistent inflationary pressures.
The measures, which had earlier received policy approval, drew criticism and resentment from various quarters over concerns that they deviated from sound taxation principles and would place an additional burden on low-income groups.
The prime minister has also directed the authorities to waive all taxes on freelancers and content creators.
Regarding the proposed wealth tax, he instructed that it should not be introduced without a comprehensive impact assessment.
According to the tax official, the measure previously failed to deliver the desired results in Bangladesh and was also abandoned in neighbouring India.
"The existing draft proposal on wealth tax will have to be dropped. Following a proper impact assessment, the tax wing may prepare a revised proposal in the future, if necessary," he said.
However, the government plans to introduce a five-year roadmap for individual and corporate taxation.
Under the plan, the existing corporate tax structure will remain unchanged for the first four years, followed by a slight reduction in the fifth year.
The tax official also said there would be no minimum tax deducted at source without a provision for refund or adjustment.
At present, companies are required to pay a minimum tax regardless of whether they make profits or incur losses, and such payments are not refundable even when businesses suffer losses.
"From the next fiscal year, companies will be able to claim refunds or adjustments against taxes paid in cases where they incur business losses," the tax official said.
Meanwhile, the highest income tax slab for individual taxpayers will be increased to 35 per cent in the upcoming budget.
The government also plans to reintroduce 20 per cent source tax on offshore loan interests from the next fiscal year.
Commenting on the matter, Dr Masrur Reaz, chairman of Policy Exchange Bangladesh, said the government's decision to reconsider some of the proposed measures reflected the need to balance revenue mobilisation with economic realities and taxpayers' capacity.
"It is a welcome step that the government has decided to drop the black money whitening facility as such a scheme undermines efforts to strengthen governance and promote tax compliance," he said.
"There should be no official provision for whitening undisclosed money as it weakens the integrity of the tax system and discourages the development of a healthy tax culture."
However, he noted that legitimate income from previously undeclared sources could be brought into the formal economy through payment of a penalty tax in addition to the applicable tax rates.
On the proposed wealth tax, Dr Reaz suggested the government consider introducing it in the future as part of a broader strategy to reduce inequality and strengthen progressive taxation.
"Tax policy is an important fiscal tool for addressing inequality and reducing poverty. At some stage, a properly designed wealth tax may become necessary," he said.
"However, this may not be the right time to introduce such a measure given the prevailing inflationary pressures and the economic challenges facing the new government."
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