National Board of Revenue (NBR) Chairman Md Abdur Rahman Khan on Tuesday said the government wants to implement a single, universal value-added tax (VAT) rate in the country if the business community reaches a consensus.
"If necessary, we will lower the rate. But it should be a single rate, provided the business people come to a consensus," he said at a pre-budget meeting with the leaders of Foreign Investors' Chamber of Commerce and Industry (FICCI) and Metropolitan Chamber of Commerce and Industry (MCCI) at the NBR office in the capital.
Elaborating further, he said there might be two VAT rates at best.
"If the service sector thinks the rate is harsh for them, we can lower it for them. But we have to bring discipline in the VAT rate," he further said.
MCCI at the meeting urged reforms in advanced income tax (AIT) and turnover tax policies in addition to lowering the corporate tax rate in a pragmatic way. It also said the tax should be based on income instead of turnover.
Khan said if a single VAT rate can be fixed and if everyone takes input VAT credit, there will be no need to pay VAT at 15 per cent and 7.5 per cent.
"You will pay VAT based on your value addition. We have to go towards that direction," he also said.
The NBR chief said the government wanted to formulate the VAT law in 2012.
"It was later implemented in 2019, but faced strong protests from the business community. Then we deviated from our commitment and implemented it in a different manner. But our commitment was to implement a single VAT rate," he explained.
MCCI President Kamran T Rahman, FICCI President Zaved Akhtar, and FICCI Consultant Snehasish Barua were present at the meeting, among others.
Kamran said though the corporate tax rate has been lowered conditionally in recent years, none can enjoy the benefit due to the condition of cash transaction.
Some 80 per cent of Bangladesh's economy is informal, where transactions do not always happen through banking, he noted, adding this creates difficulties for medium and large companies to fulfil the condition.
The MCCI president also said the effective tax rate is exceedingly high.
In its proposal, MCCI said there are scopes to reduce tax evasion tendencies and increase revenue through the development of the tax regime and the introduction of automated digitalisation.
The trade body demanded the segregation of tax policy and tax administration, as well as easing taxation by digitalisation of the entire tax regime.
It also called for improving the policies related to proof of submission of return, revoking tax on private sector pension funds, and fixing separate tax rates to help small and medium entrepreneurs flourish.
Meanwhile, FICCI emphasised the importance of collaboration with NBR to create a more integrated tax system that streamlines revenue collection processes and improves the effectiveness of internal revenue mobilisation efforts.
It recommended the recognition and establishment of a clear distinction between policy formulation and revenue collection. This separation is seen as a critical step to ensure greater efficiency, transparency, and fairness in the tax system, it said.
The chamber highlighted the need to shift towards a more robust and direct taxation system. It proposed establishing a dedicated data and analytics team within NBR to drive this shift, enabling more effective tax collection and compliance.
To attract more foreign investments, FICCI suggested optimising the effective tax rate by withdrawing the thresholds for inadmissibility, rationalising tax deducted at source (TDS), and gradually eliminating the minimum tax. These steps are aimed at creating a more competitive tax environment, which will ultimately foster greater FDI inflow, it noted.
To further streamline trade and ensure timely business operations, FICCI called for faster resolution of issues related to imports and exports, reducing delays, and increasing ease of doing business in Bangladesh.
With Bangladesh's impending graduation from the least developed country (LDC) status, FICCI recommended the gradual elimination of non-tariff barriers. These reforms would prepare the country for the new challenges of being classified as a developing nation and enhance its global trade competitiveness, it added.
The NBR chairman said many traders import with false declarations, which cause many customs-related difficulties. Many businesses do not understand the cost of being non-compliant, he said.
"Why are compliant taxpayers compliant? Because they know the cost of non-compliance is unbearable," he added.
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