Taxes on numerous basic consumer commodities are getting cut to half as the government is set to bank on fiscal measures to combat high food inflation, sources say.
Existing tax on procurement of rice, wheat, potatoes, onions, garlic, green peas, gram, lentils, garlic, turmeric, dry chili, pulses, maize, coarse flour, flour, salt, edible oils, sugar, black pepper, cinnamon, nuts, clove, cassia leave, dates, cardamom, and all types of fruits would be cut to 1.0 per cent from the existing 2.0 per cent in the budget for the next fiscal, to be placed in parliament on June 6.
Also, procurement of jute, cotton, yarn, computer and computer parts would enjoy tax cuts in FY 2024-25.
Official sources have said the tax-cut decision has been made following instructions of the prime minister to combat food inflation through fiscal measure in the upcoming budget.
According to Bangladesh Bureau of Statistics (BBS), cost of food in Bangladesh increased 10.22 percent in April 2024 over the same month in the previous year.
Food inflation in the country averaged 6.83 per cent in 2024 over the past year, reaching an all-time high of 12.56 percent in October 2023, against a record low of 3.77 percent in February 2016.
Currently, banks or financial institutions deduct the tax on those commodities procured through letter of credit (LC) or other modes of financing agreement on paid or loan amount.
Former lead economist at World Bank, Bangladesh, Dr Zahid Hussain, however, finds the effort to tame food inflation through tax cuts not justified.
He rather suggests trying subsidizing food prices through increasing allocations, if the government could control 'market power'.
On tax cut he says, "The government has to address the need for mobilizing domestic revenue for social-safety net, higher allocation to education and health."
Meanwhile, blanket tax holiday for megaprojects and other physical infrastructures may also end in the current fiscal year.
The National Board of Revenue (NBR) would not extend the tax- holiday facility for deep-sea port, elevated expressway, export- processing zone, flyover, gas pipeline, hi-tech park, information and communications technology (ICT) village or software- technology zone, IT park, large water-treatment plant and supply through pipeline, liquefied natural gas (LNG) terminal, transmission line, mobile-phone-tower-sharing infrastructure, monorail, rapid transit, renewable energy (e.g solar energy plant, windmill), sea or river port, toll road or bridge, underground rail, waste-treatment plant, any other category of physical- infrastructure facility.
The government offered the ten-year tax holiday for newly established physical-infrastructure facilities set up between 2019 and June 30, 2024.
The tax breaks, with graduated rates, are currently considered valid from the day of commencement of commercial operation of the physical infrastructures.
For the first and second year, the tax exemption is given on 90 per cent of income, profits and gains on the physical infrastructure.
For third, fourth, sixth, seventh, eighth, ninth and tenth year, tax waiver would be 80 per cent, 70 per cent, 60 per cent, 50 per cent, 40 per cent, 30 per cent, 20 per cent of income and 10 per cent of income respectively.
Officials familiar with budget exercise said the blanket tax holyday for physical infrastructures would not be extended for next financial year.
However, the NBR may consider case-to-case tax exemption for physical infrastructure, if needed, for any megaproject or such constructions.
They said the move would help cut country's direct-tax expenditure that is eating up nearly 3.0 per cent of tax to GDP.
In the upcoming budget, tax burden on aluminum and powdered milk may go up while Advance Income Tax (AIT) at 5.0 per cent on import of goods would remain unchanged.
There would be no changes to tax-free ceiling for individual taxpayers, travel-tax rate, wealth surcharge, and environmental surcharge on cars.
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