The National Revenue Board (NBR) has proposed a reduction in the corporate tax rate in the next financial year to give businesses a break.
The corporate tax rate has been reduced to 30% from 32.5% for unlisted companies, and for listed companies it has been reduced to 22.5% from 25% in FY 2021- 22 current.
The tax authority has also proposed to increase the penalty for non-compliant businesses, while it is willing to reduce the penalty for late submission of VAT and tax returns.
The council made the proposals in a draft revenue budget structure for the financial year 2022-23 aimed at promoting local manufacturing industries and providing convenience to consumers, sources said.
The new draft budget also includes a number of proposals to widen the tax net without increasing tax rates.
Senior NBR officials led by its chairman will meet Finance Minister AHM Mustafa Kamal today and tomorrow and the Prime Minister on May 12 to finalize the draft revenue budget structure, the sources told The Business Standard.
According to the current tax structure, the corporate tax rate is 37.5% for listed banks and those licensed after 2013, 40% for unlisted banks and 37.50% for banks in business.
Manufacturers of cigarettes, jorda, gul and other tobacco products must pay 45% corporation tax, while listed mobile operators must pay 40% and unlisted operators 45%.
The tax rate for sole proprietorships (OPCs) is 25%, while it is 15% for textile factories, registered cooperative societies and private universities.
Currently, undisclosed money is allowed for equity investments, but subject to paying a 25% tax plus a 5% fine.
Manufacturers of cigarettes, jorda, gul and other tobacco products must pay a 45% corporate tax, while listed mobile operators pay an additional 40% and an additional 20% on dividend income.
In addition, garment exporters must pay 12% corporate tax and 10% for green factories.
Senior officials involved in this process mentioned that the new budget will take a number of initiatives to ease the business environment and business costs, as well as reduce the cost of living to cope with inflation, given that the prices of various commodities have already increased due to the ongoing Russian-Ukrainian war and the upcoming challenges as the country is expected to become a developing country by 2026.
The new budget may continue to allow untaxed money in the stock market, apartments, land, bank deposits, savings instruments and cash.
Sources said relevant NBR officials, led by the chairman of the board, held several meetings to review the budget proposals received during the pre-budget discussions with different business, professional and private agencies and prepared the draft. tax structure after carefully evaluating all these proposals.
The NBR will now meet with the finance minister and the prime minister to discuss the project, they said, adding that the next budget will be finalized after these crucial meetings.
The sources further said that whenever the Prime Minister gives direction on important matters. For example, the Prime Minister decides on non-taxable income limits, corporate tax rates and the investment of black money in the capital market. These will also be finalized on his advice in this year’s budget.
Apart from this, the Prime Minister will give instructions on whether to increase the VAT exemption facility to keep the prices of import-dependent products, especially soybean oil, within purchasing power. of the people, they added.
It will also decide on the tariff reduction for olive oil, sunflower oil, rapeseed oil and canola oil, the sources continued.
The NBR has set the revenue collection target for the financial year 2022-23 at Tk 3,70,000 crore.
According to NBR sources, Tk 1,22,100 crore or 33% of the total revenue collection target will be levied as income tax, while Tk 1,36,900 crore will be levied as value tax. added (VAT) and Tk 1.11 lakh. crore as customs duties, which represent 37% and 30% of total revenue targets respectively.
The target is 12% higher than the current year target of Tk 3,30,000 crore. The NBR managed to reach 53% of the target until February this year.
These goals can be achieved within the existing tax structure as trade and commerce have gained momentum overcoming the Covid-induced downturn, officials said, adding that authorities have therefore moved away from the idea of raise tax rates.
Mentioning that the next budget will be similar to the current budget, they also said that among the new initiatives will be an attempt to revive local industry with tax breaks.
In this regard, careful consideration is underway to determine which sectors can benefit from the tax breaks, they said.
Among domestic industries, electronics, motorcycles, steel, packaging, small and medium industries will see the imposition of new taxes. On the other hand, there will be initiatives to facilitate the conduct of business by strengthening automation activities.
The sources also mentioned that special emphasis will be placed on virtual economy, transfer pricing unit and audit activities to increase tax collection. For this, a new section will be added in the income tax law. Above all, the income tax law will be made business-friendly by updating it.
In addition, there will be guidelines to increase irregularities in the prevention of misuse of deposits, the installation of EFDs (electronic tax devices) to combat VAT fraud and the deployment of list-based control.
NBR officials believe that if the non-taxable income limit is increased, a large number of people will be excluded from the scope of income tax. Thus, the NBR is against increasing this limit. As this is more of a “political decision” than a political decision, it is the Prime Minister who has always made the decisions in this regard, they added.
However, very little revenue is collected from individual taxpayers. Most of the income tax is levied as withholding tax, the rest coming from corporation tax and withholding tax on income.
According to official data, the last non-taxable income limit was increased in the budget for fiscal year 2016.
This time, the non-taxable income limit for services has been increased from Tk 2.2 lakh to Tk 2.5 lakh.
Since then, the non-taxable income limit has remained unchanged until the current financial year.
Currently, an annual income of up to Tk 3 lakh is exempt from paying tax and the cap is expected to prevail next year.
The NBR has raised the non-taxable income threshold by Tk 2.5 lakh after five years to provide relief to low-income people so that they can better manage the economic hardship caused by the pandemic.
Business and professional organizations have repeatedly urged the BNR not to increase the ceiling on non-taxable income, even though the standard of living has increased.