Main features of new fiscal measures
Friday, 8 June 2007
FE Report
Simplification of procedures in income tax payment, rationalisation of tariff structure, reducing tariff discrimination and expansion of the existing net on the Value Added Tax (VAT) are the main features of the proposed new fiscal measures.
The proposed fiscal measures also include changes in existing rules to discourage income tax evasion, reduction of discretionary power of the customs officials and decrease in penalties on VAT evasion.
The proposal abolishing the provision of paying tax at a specified rate for construction of building or buying house, property or flats or land or purchasing car, with undisclosed and untaxed money, however, was predictable.
While announcing the fiscal measures, Finance and Planning Adviser Mirza Azizul Islam said resource mobilisation from domestic sources is one of the preconditions for attaining economic sovereignty by a developing country like Bangladesh.
"However, the revenue collection is not increasing compared to the growth of GDP. In FY 2005-06, while the revenue-GDP ratio was 10.6 percent, by the end of current fiscal year this may slide down to 10.4 percent," he said.
He added: "In this context, raising the revenue-GDP ratio to 10.8 per cent will turn out to be a great challenge."
The changes are minimum tax on the basis of turnover to be reduced from 0.50 per cent to 0.25 per cent, 50 per cent of foreign travel expenses of company directors in excess of four travels from the existing two travels to be deemed as income of the company directors, provision for deduction of tax at source on credit card bill, interest on loans up to Tk 2.0 million used for self-occupied accommodation to be admitted as allowable expense, allowing 15 per cent tax rebates for private universities and research institutions registered under Trust Law, abolition of provision of paying tax at a specified rate for construction of building or buying house property or flats or land or purchasing car, with undisclosed and untaxed money, considering 5.0 per cent of transfer to statutory reserve of financial institutions as allowable expense instead of 10 per cent.
For the new fiscal, mobile phone operator companies' corporate tax rate was proposed to be increased to 45 per cent. But the tax rate would be 35 per cent if the companies were converted as publicly traded companies and enlisted with the stock exchanges.
The new budget also see expansion of tax deductible at source as Tk 1,000 was proposed against issuance and renewal of trade licenses by City Corporations, 0.25 per cent on all export earnings which will be considered as tax finally paid, 10 per cent instead of existing 5 per cent from the payments made to the doctors and hospitals and diagnostic centres, 7.5 per cent from freight forwarding agency commission and 10 per cent on interest from savings instruments if such interest exceeds Tk 25,000 per annum, 7.5 per cent, instead of 5 percent, on commission income of stevedoring, C&F, non-resident courier service, marketing, insurance and general insurance surveyor.
Complete withdrawal of 4.0 per cent infrastructure development surcharge and introduction of duty slabs at 10 per cent, 15 per cent and 25 per cent instead of existing 5 per cent, 12 per cent and 25 per cent were suggested.
The new fiscal measures also proposed merger of two slabs of supplementary duty at 15 per cent and 25 per cent into a single slab of 20 per cent, imposition of flat duty at the rate of Tk 20,000 and Tk 39,000 per tonne on base lubricating oil and finished lubricants respectively to avoid the complexities in determining the value of lubricant and to reduce litigations and inclusion of cement clinkers under the mandatory pre-shipment inspection.
The finance and planning adviser proposed withdrawal of zero duty on textile machinery, computer and computer accessories, withdrawal of existing duty exemption on telecommunication, equipment and liquid dielectric transformer and to increase duties on these items to bring them at par with VoIP equipment and other transformers to end tariff discrimination.
To facilitate the availability of vehicles to the middle class users increase of the dealers' commission discount rate of used reconditioned cars from 25 per cent to 30 per cent was proposed.
Besides in the new fiscal, the government proposed reduction of customs duty on CNG driven trucks from 25 per cent to 10 per cent and enhancement of customs duty from 5 per cent to 15 per cent on CNG driven complete knocked down (CKD) buses to develop the assembling industry for CNG-driven bus.
Imposition of supplementary duty at the rate of 60 per cent on SIM card and different kinds of plastic products and reduction of customs duty rate from 25 per cent to 15 per cent on the import of newsprint were proposed.
In order to enhance transparency and accountability of the revenue administration, and to reduce the discretionary powers of the customs officials, the finance and planning adviser proposed preparation of specific guidelines for the issuance of bond license, bringing in more transparency in the procedure of extending bond period, simplifications in the customs procedures in line with the Kyoto Convention, more clarity on tariff description of a number of commodities and making it mandatory to write "Import under Bond Not for Resale" on the packing of imported commodities to stop their sale in local markets.
Simplification of procedures in income tax payment, rationalisation of tariff structure, reducing tariff discrimination and expansion of the existing net on the Value Added Tax (VAT) are the main features of the proposed new fiscal measures.
The proposed fiscal measures also include changes in existing rules to discourage income tax evasion, reduction of discretionary power of the customs officials and decrease in penalties on VAT evasion.
The proposal abolishing the provision of paying tax at a specified rate for construction of building or buying house, property or flats or land or purchasing car, with undisclosed and untaxed money, however, was predictable.
While announcing the fiscal measures, Finance and Planning Adviser Mirza Azizul Islam said resource mobilisation from domestic sources is one of the preconditions for attaining economic sovereignty by a developing country like Bangladesh.
"However, the revenue collection is not increasing compared to the growth of GDP. In FY 2005-06, while the revenue-GDP ratio was 10.6 percent, by the end of current fiscal year this may slide down to 10.4 percent," he said.
He added: "In this context, raising the revenue-GDP ratio to 10.8 per cent will turn out to be a great challenge."
The changes are minimum tax on the basis of turnover to be reduced from 0.50 per cent to 0.25 per cent, 50 per cent of foreign travel expenses of company directors in excess of four travels from the existing two travels to be deemed as income of the company directors, provision for deduction of tax at source on credit card bill, interest on loans up to Tk 2.0 million used for self-occupied accommodation to be admitted as allowable expense, allowing 15 per cent tax rebates for private universities and research institutions registered under Trust Law, abolition of provision of paying tax at a specified rate for construction of building or buying house property or flats or land or purchasing car, with undisclosed and untaxed money, considering 5.0 per cent of transfer to statutory reserve of financial institutions as allowable expense instead of 10 per cent.
For the new fiscal, mobile phone operator companies' corporate tax rate was proposed to be increased to 45 per cent. But the tax rate would be 35 per cent if the companies were converted as publicly traded companies and enlisted with the stock exchanges.
The new budget also see expansion of tax deductible at source as Tk 1,000 was proposed against issuance and renewal of trade licenses by City Corporations, 0.25 per cent on all export earnings which will be considered as tax finally paid, 10 per cent instead of existing 5 per cent from the payments made to the doctors and hospitals and diagnostic centres, 7.5 per cent from freight forwarding agency commission and 10 per cent on interest from savings instruments if such interest exceeds Tk 25,000 per annum, 7.5 per cent, instead of 5 percent, on commission income of stevedoring, C&F, non-resident courier service, marketing, insurance and general insurance surveyor.
Complete withdrawal of 4.0 per cent infrastructure development surcharge and introduction of duty slabs at 10 per cent, 15 per cent and 25 per cent instead of existing 5 per cent, 12 per cent and 25 per cent were suggested.
The new fiscal measures also proposed merger of two slabs of supplementary duty at 15 per cent and 25 per cent into a single slab of 20 per cent, imposition of flat duty at the rate of Tk 20,000 and Tk 39,000 per tonne on base lubricating oil and finished lubricants respectively to avoid the complexities in determining the value of lubricant and to reduce litigations and inclusion of cement clinkers under the mandatory pre-shipment inspection.
The finance and planning adviser proposed withdrawal of zero duty on textile machinery, computer and computer accessories, withdrawal of existing duty exemption on telecommunication, equipment and liquid dielectric transformer and to increase duties on these items to bring them at par with VoIP equipment and other transformers to end tariff discrimination.
To facilitate the availability of vehicles to the middle class users increase of the dealers' commission discount rate of used reconditioned cars from 25 per cent to 30 per cent was proposed.
Besides in the new fiscal, the government proposed reduction of customs duty on CNG driven trucks from 25 per cent to 10 per cent and enhancement of customs duty from 5 per cent to 15 per cent on CNG driven complete knocked down (CKD) buses to develop the assembling industry for CNG-driven bus.
Imposition of supplementary duty at the rate of 60 per cent on SIM card and different kinds of plastic products and reduction of customs duty rate from 25 per cent to 15 per cent on the import of newsprint were proposed.
In order to enhance transparency and accountability of the revenue administration, and to reduce the discretionary powers of the customs officials, the finance and planning adviser proposed preparation of specific guidelines for the issuance of bond license, bringing in more transparency in the procedure of extending bond period, simplifications in the customs procedures in line with the Kyoto Convention, more clarity on tariff description of a number of commodities and making it mandatory to write "Import under Bond Not for Resale" on the packing of imported commodities to stop their sale in local markets.