The government will lower corporate tax to 12% for non-RMG sectors

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The discounted rates will not apply to transportation service, mobile telecommunications service, and internet and internet-based services, ministry officials said.

June 06, 2022, 11:10 p.m.

Last modification: 07 June 2022, 00:45

Infographic: TBS

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Infographic: TBS

The government will introduce a corporate tax of 12% for all export sectors – the same rate currently enjoyed by the ready-to-wear industry – in a bid to encourage export diversification, sources say. Ministry of Finance.

In addition, green industries exporting goods and services will be taxed at 10%. All sectors other than RMG now pay a 30% tax on exports of goods and services.

The massive corporate tax reduction will ensure a level playing field for all other sectors. This type of export-friendly initiative will reduce the trade deficit with other countries, according to sources at the Ministry of Finance.

The foreign exchange balance of payments deficit will also be minimized, they noted.

The applicable tax rate for export-oriented RMG factories is 12% and 10% for green factories.

The discounted rates will not apply to transport services, mobile telecommunications services and internet and internet-based services, ministry officials said.

Welcoming the move, Shamim Ahmed, president of the Bangladesh Plastic Products Manufacturers and Exporters Association, told The Business Standard: “This will play an important role in stimulating local and foreign investment.

Moazzem Hossain Moti, President of the Association of Garment Accessories and Packaging Manufacturers and Exporters, said the RMG sector also benefits from additional facilities while benefiting from customs-related services. If a level playing field is ensured here too, it will help non-RMG sectors to diversify further.

Dr Ahsan H Mansur, executive director of the Policy Research Institute, said it was a very important move to promote other industries and maintain equality with the export-oriented apparel sector.

The move will also be helpful in reducing the trade deficit to some extent, he also said.

The economist suggested that the government provide duty-free access to raw materials to all exporters under a central bonded warehouse, he noted.

Welcoming the government’s decision, Abul Kashem Khan, administrator of Business Initiative Leading Development, said it would be a revolutionary step to diversify the export basket.

“Providing the same facility to all export sectors is our long-standing demand, which will help them grow equally,” he added.

The government should consider setting up a common bonded warehouse for all exporters, also said Abul Kashem, former chairman of DCCI.

10% withholding tax for future internet services

The government will levy a 10% withholding tax on Internet services. In addition, the withholding tax on bandwidth payments made to foreign companies without establishment in Bangladesh will be reduced by 10% instead of the current 20%, according to Ministry of Finance sources.

It could also be proposed in the next budget to consider the 5% adjustable tax levied on imports of beverage concentrates, exports of services, operations of inland vessels and commercial vehicles as a minimum tax.

Currently, children who receive gifts of money, land and other assets from their parents are exempt from tax.

But the tax is imposed on gifts received by the parents of their children. There will be no such taxes in the next fiscal year.

No possibility to invest black money in stocks

The opportunity to launder the undisclosed money by investing in the capital market will arise in the next fiscal year, with no response expected from untaxed fund holders in the current fiscal year.

During the current financial year, the untaxed money can be invested in the stock market, subject to the payment of a tax of 25% plus a penalty of 10% on the tax payable.

The government will also remove the ability to legalize undisclosed assets, such as apartments, bank deposits and savings instruments under similar conditions.

Withholding tax on new services

The new budget will also propose to impose a 5% withholding tax on the rental value of bodies of water that are not state property.

At the same time, internet service providers will also face a 10% withholding tax when receiving their payments.

Ministry of Finance officials said that the withholding tax will be revised to make it simpler as the current tariffs for a service are divided according to the amount which does not exceed Tk 25 lakh – if the amount is higher, the rate is higher.

According to the new budget proposals, withholding tax on advisory or consulting services, professional services, credit rating services, technical services and technical assistance fees will be deducted at a rate of 10% instead of the current 12%.

At the same time, catering service, cleaning service, collection and recovery service, private security service, labor supply service, creative media service, public relations service, event service, service training, workshop, organization and management, packaging courier service and moving service will be taxed at the same rate.

Ministry of Finance officials believe that if all these proposals are approved, economic activities in Bangladesh will continue to be vibrant, foreign remittances will increase with the growth of the export sector, the tax net and formal economy will increase, new entrepreneurs will grow and employment will increase. generate, foreign investment will increase and a favorable business environment will be ensured.

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