A catch-all tax dragnet likely in new budget

Zero-rated import taxing is no more as a catch-all tax dragnet is being set in the upcoming budget to spare none, nor even the special- privilege-enjoying lawmakers, sources say.
A provision of nominal taxes is envisaged to replace the complete waiver, as part of a latest plan to enhance Bangladesh's low tax-GDP ratio.
In the first place, the National Board of Revenue (NBR) may withdraw the duty-free benefit on import of cars by the lawmakers in the next fiscal year.
The government revenue authority, on the other hand, is considering slashing corporate-tax rate by 2.5 per cent by tagging some conditions for availing the benefit in the FY 2024-25.
Sources in the NBR said the proposals were placed in a meeting Sunday with Finance Minister Abul Hassan Mahmood Ali and State Minister for Finance Waseqa Ayesha Khan, at the pinnacle of budget-making process.
Officials said the proposals received "positive nod" from the finance minister and might be finalised in a meeting with Prime Minister Sheikh Hasina, scheduled for tomorrow (May 14).
As per the Customs Act, a number of capital machinery, agriculture inputs and some raw materials for manufacturing sector are entitled for zero-duty import.
In the meeting with the NBR, held at its office, the minister instructed framing fiscal measures with sights on "current economic perspectives and in a business-friendly manner" so as to strike a balance between government vision and recommendations of the International Monetary Fund (IMF).
"Make a cautious move on phasing out tax exemptions considering survival of the local industries," the finance minister was quoted as saying in his direction.
The minister also suggested keeping the tax benefit for Information and Communications Technology (ICT) in a modified form for next year.
The tax benefit for ICT sector is destined to expire on June 30, 2024.
Income Tax, VAT and Customs wings of the NBR placed their budget proposals in separate meetings with Mr Mahmood.
The customs wing proposed to phase out tax benefit from import of finished goods and cut a bunch of tariff protections to encourage domestic industries to export their goods.
Tax officials said take it as an "uphill task to frame fiscal measures balancing two aspects -- increasing tax-GDP ratio and focus on business-friendly taxation.
As per the IMF prescribed target, the NBR will have to raise its tax-GDP ratio, currently 7.9 per cent, by 0.5 percentage point in the next FY.
NBR officials said they have to phase out the tax breaks from the industries that became self-reliant with the fiscal incentives and developed capacity to pay taxes.
On imposing a nominal tax replacing zero rate, the officials said industries "will have to develop tax- payment culture by starting to pay a nominal amount of taxes".
Currently, Customs have six base rates as Customs Duty (CD) such as 0, 1, 5, 10, 15, 25 per cent. As per graduation criteria for Bangladesh to be a middle-income country by 2026, the customs will have to cut down the highest slab by 5.0 percentage points to 20 per cent.
It will also have to cut back on the minimum value of import goods as per Trade Facilitation Agreement (TFA) of the World Trade Organisation.
Currently, a Member of Parliament is entitled to duty-free benefit on import of one car in his/her tenure. The provision was introduced during the Ershad rule, on May 24, 1987.
Almost all MPS availed the duty-free benefit earlier to import luxury cars, which raised controversies on alleged handing over the car to a third party earlier.

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