Tax waiver facilities to come under high-level scrutiny

The government moves to cut tax-exemption facilities to help raise the country's 'poor' tax-GDP ratio, officials said.

Currently, the ratio of tax to GDP (gross domestic product) is only 10 per cent -- rated one of the poorest in the region.

As per the initiative, the tax authority is going to review the taxation policies following a recent instruction from Finance Minister AMA Muhith.

The finance minister directed the National Board of Revenue (NBR) to prepare a working paper with some key issues that would be placed in a top-level government meeting. Prime Minister Sheikh Hasina is expected to preside.

The minister's directive came following a tax-holiday plea of the Public Private Partnership (PPP) Authority under the Prime Minister's Office (PMO).   

However, he approved the PPP authority's plea.

The PPP authority has sought waiver of Value Added Tax (VAT) on some services under PPP projects.

Sources said the government high-ups would scrutinise the working paper at the meeting. The meeting is likely to be held this month (March) with ministers and secretaries concerned attending.

Mr Muhith instructed the NBR to include five points in the working paper, purportedly to substantiate the move to squeeze the tax-waiver facility.

The finance minister, in the note, said the government will be "rigid against providing tax exemption in future".

He observed that the tax authority has to offer tax exemption for different reasons.

In the instructions, he also stressed the need for promoting "tax-payment culture so that individual and corporate taxpayers become habituated to paying tax".

He vowed not to offer tax exemption to anyone who makes the plea. "Everybody has to pay tax," said the finance minister, who forecast a yet bigger budget in the coming fiscal year -- probably in the equivalent of Tk 3.4 trillion.

However, he pointed out some sectors that will continue to enjoy tax-breaks, including diplomats, import of machinery or goods under grants.

"In this perspective, the importing companies have to pay tax regularly to the public exchequer and must have fund allocation for payment of tax," he wrote.

The working paper will also contain the scenario of country's 'poor' tax-GDP ratio.

Tax-exemption and tax-holiday facilities, which the government offers for industrial growth, cost Tk 154 billion in revenue or 2.5 per cent of the country's GDP a year.

To prepare the concept paper, NBR Chairman Md Nojibur Rahman has formed a five-member committee. NBR member (customs policy) Farid Uddin is convener of the committee, which comprises members of the income tax policy, VAT policy, tax exemption and customs duty, export and bond wings.

NBR officials said the committee would finalise the working paper soon for placing it before PMO for discussion on the proposed curbs on tax-holidaying.

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