Tax-free ceiling for individuals may rise

Finance Minister AMA Muhith is scheduled to announce national budget for 2011-12 fiscal on June 9, in parliament, which might raise the tax-free ceiling for individual taxpayers. Officials said the tax-free ceiling for individual taxpayers is likely to be raised and corporate tax rates might remain unchanged in the upcoming budget. The revenue budget is likely to be set at nearly Tk 910 billion. Target for income tax might be set at Tk 274 billion, value added tax (VAT) at Tk 331 billion and customs revenue at Tk 307 billion, according to a provisional figure. NBR officials said the targets might be re-adjusted further in line with the instruction from the government high-ups. Muhith recently instructed the National Board of Revenue (NBR) to finalise the budget books, speech by this month. The NBR is set to send all copies of budget books to Bangladesh Government (BG) Press by May 31. The finance minister has sent a letter to Speaker of the National Assembly Md. Abdul Hamid with the latest update of the budget works. The NBR and the finance ministry held a series of meetings with the chamber bodies, businessmen and small and medium enterprises to discuss their proposals before budget. Major chamber leaders have proposed that the NBR raise tax-free ceiling for individual taxpayers considering spiraling costs of daily life expenditures due to price hike of essential food items. Officials said the government is likely to discontinue the tax holiday facility that is scheduled to expire on June 30 for new industries. Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) has proposed to raise tax-free ceiling for individual taxpayers to Tk 2,25,000 from existing Tk 1,65,000. Banks, financial institutions, corporate houses and renowned businessmen have proposed that the government cut corporate tax rates as they are the highest in Bangladesh. Currently, banks and financial institutions are paying corporate tax at 42.5 per cent on their annual income. Talking to the FE Tuesday, economists and former policymakers have also underscored the need for raising the tax-free threshold for individual taxpayers. Dr. Mustofa K Mujeri, director general of Bangladesh Institute of Development Studies (BIDS) and former chief economist of Bangladesh Bank, said the existing threshold for individual taxpayers could be raised by 10 per cent considering the inflation. The real income of people will be constant if the government raised the tax-free ceiling after adjustment with inflation, Mujeri said. "The tax-free ceiling has been set to help low income people. The government can readjust the ceiling considering the daily life expenditures," he said. Abdul Mazid, former chairman of the NBR, said the government did not raise the tax-free ceiling in the last two years but now time has come to increase it. "It is true that many of the marginal taxpayers will be dropped from the taxpayers' net, but the number of taxpayers could be raised by expanding the net," he said. Dr. Mustafizur Rahman, executive director of Centre for Policy Dialogue (CPD), said the CPD has proposed that the government should raise individual tax-ceiling to Tk 2,00,000 as the current threshold was set three years back. "We have proposed three separate rates taking into account the present inflation rates. For women, we have proposed Tk 2,20,000 and for people with disability Tk 2.40,000," he said. None of the economists have agreed on cutting of the corporate tax rates, which was recommended by all chamber bodies and business leaders. Dr. Mujeri said: "Profit margin of the country's corporate bodies is high. So, they are paying tax at higher rates." "I don't see any logic to cut the corporate tax rates. It is not so high compared to the profits of the corporate bodies," he said. Corporate houses are getting other benefits and fiscal incentives from the government, he added. Dr. Mustafiz said the government can provide more incentives to bring big companies in the capital market. Currently, the corporate houses can enjoy 10 per cent tax rebate by enlisting with the share exchanges, which could be raised instead of slashing corporate tax rates, he said. Abdul Mazid said the NBR will have to expand the net before reducing corporate tax rates to avoid any adverse impact on revenue earning. Existing tax net is not so wide as to reduce the corporate tax rates as a big amount of tax comes from the corporate bodies, he said.