Income Tax, Value Added Tax
NBR officials work relentlessly to achieve the revenue target set by the government every year.
NBR tax revenue is basically collected from Income Tax, Value Added Tax (VAT) and Import & Export
Duty. Except for Income Tax, the other two are indirect taxes. Supplementary duty and regulatory duty are also collected as indirect taxes. I am now submitting revenue proposals one after another. Direct Tax:
Income tax is considered as an effective taxation system because it ensures social justice and equity through redistribution of income. The income tax system in Bangladesh will be made more effective to ensure the reduction of income inequality so that the benefit of economic growth and development can be distributed to all the citizens equally. We have set a target of collecting 50 percent of total NBR
Even a decade back, the contribution of income tax was only 20 percent of total NBR tax revenue; the contribution has increased to 35 percent during the tenure of our government.
Our main principle is to collect more income tax by broadening the tax base without increasing the tax rate. For this purpose, we have taken an initiative to bring new taxpayers under the tax net instead
of burdening the existing taxpayers with more tax. During the last ten years of our government, a large number of peoples are eligible to pay income tax; thanks to the unprecedented economic growth and development that took place in our country. To bring these people into the tax net, expansion of 80 income tax department is necessary. Effective initiatives have already been taken to expand the Income Tax department. With this expansion program, tax offices will be set up in every Upazila in Bangladesh.
At the field level, the number of Taxes Zone will be increased to 63 from existing 31. For making the tax administration more goal-oriented, job-oriented and taxpayer-friendly, the tax intelligence, investigation and enforcement unit; digital tax management unit; tax deduction management unit; tax information unit; international tax unit; taxpayer service, public relations and infrastructure unit; and tax dispute resolution unit will be set up. I hope, with a successful implementation of these initiatives, revenue on average will grow by 25 percent in the coming years, and the Tax-GDP ratio will increase to 15 percent by 2021.
To achieve Sustainable Development Goals (SDGs) by 2030 and fulfill the dream of raising the status of Bangladesh to a developed nation by 2041, we have to scale up revenue collection, in particular, income tax collection significantly. However, we have to ensure that revenue augmentation efforts do not affect adversely our businesses and investments. We believe
General tax exemption threshold of income of taxpayers, other than a company, for the last few years was Tk. 2,50,000/-. The threshold for female taxpayers was Tk. 3,00,000/-. In addition, this threshold is higher for other special classes of taxpayers. The criteria for keeping the threshold unchanged for the last few years have remained t
Company Tax Rate
Currently, multiple corporate tax rates are in existence for different corporate sectors. For a publicly traded company, the tax rate in Bangladesh is 82 25 percent and for publicly non-traded company tax rate is 35 percent. Besides, a good number of corporate sectors are enjoying reduced tax rates and tax exemptions. When these facts are taken into consideration, we find the effective corporate tax rate in
Bangladesh is below 5 percent. In addition, the tax rate for banks and financial institutions was reduced by 2.5 percent from last year, which resulted in
Considering the facts, I propose to continue with the existing corporate tax rate structure for the next year. The proposed tax rate for company taxpayers has been presented in Table 3 of Annexure-B
Nonetheless, in view of reality, I propose to raise the minimum tax for mobile companies to 2% of their turnover from 0.75%.
Madam Speaker Equity and Fairness
Surcharge. At present, wealth tax law does not exist in Bangladesh. Instead of paying wealth tax, wealthy individual taxpayers in Bangladesh pay a surcharge at certain rates based on their income tax.
This provision of surcharge has been in force for the last few years. We have observed that a large number of wealthy people show little income in their tax returns despite they possess a huge amount of wealth. Consequently, they pay an insignificant amount of surcharge because they revealed little income. Considering all these facts, I propose an individual taxpayer having a net wealth of Tk. 50 crore or above shall pay higher of 0.1% of
I propose a minimum surcharge amounting to Tk. 3,000, where
Facilitating business and growth
The income generated through the
more investment and create more employment, I propose a new provision in the income tax law, to accept investment in Economic Zone and High-Tech Parks, without any question on the sources of invested fund, by the income tax department, if the taxpayer pays 10 percent income tax on such invested amount. At present, Income Tax department does not raise any question about the sources of fund invested in the purchase or construction of any apartment or flat, and building if tax is paid at certain rates on such investments. Taxpayers are not availing this opportunity due to the higher tax rates. I propose to decrease existing tax rates to encourage the taxpayers for voluntary disclosure of purchase or construction of any apartment or flat, and building in their tax returns. I hope that taxpayers will avail this opportunity and will voluntarily reveal their undisclosed investment on purchase or construction of apartment or flat, and building in their tax files to include them into the tax net.
Under the existing law, 21 industrial sectors and 19 physical infrastructure development sectors have been enjoying tax holidays on the basis of geographical locations at different rates for different periods of time. This benefit will expire on 30 June of this year. With a view to promoting business and investment, augmenting export and creating employments, I propose the facilities of tax holiday to continue and also to include some potential manufacturing sectors such as agricultural machinery; furniture; home appliance – rice cooker, blender, washing machine etc.; mobile handset; toys; leather and leather goods; LED television; plastic recycling.
Many people think that the tax deduction rates at source on the bill of contractors and suppliers are high. We have examined this issue and considering all aspects, I propose to decrease the maximum tax deduction rate at source on the bill of contractors and suppliers from 7% to 5%. Details on these are presented in Table 5 of Annexure-B.
A taxpayer has to pay tax in advance if the taxpayer’s last assessed income is above Tk. 4 lakh. I propose to raise this to Tk. 6 lakh. On the other hand, currently small and medium enterprises (SMEs) are not required to pay income tax if the yearly turnover of the business is up to Tk. 36 lakh. To promote SMEs, I propose to raise this yearly turnover limit to Tk. 50 lakh. In the existing law, income derived from the export of handicrafts is also exempted from tax. This exemption will expire on June 30, this year. To promote this sector, I propose to extend this exemption facility for the next five years.
The tax rate for readymade garments is 12%. The rate is 10% if there is
Besides, for textile sector tax rate is 15%. These sectors are enjoying reduced rates of taxes for a long period of time. This advantage will expire by 30 June of this year. Considering the contribution of these sectors to our economy, particularly in boosting export and generating employment opportunities, I propose to continue this provision of
Our government is doing its best to protect the interest of the 85 physically challenged people. We want to reflect this principle in taxation as well. Study shows 10 percent of our population has some sort of disability. Considering this fact, I am proposing a 5 percent rebate on
For ensuring services to the persons with
Incentives for the share market
Investors expect cash dividends from their investment in the shares of a company. From that point of view, cash dividend
It is also observed that some companies retain or reserve the net profit instead of distributing dividends to investors. For this reason, investors are deprived of getting dividends from their investment and this, in turn, is adversely affecting our share market. For the sake of smooth operation of the capital market this tendency has to be addressed. Therefore, I propose the imposition of 15 percent additional tax on so much of retained 86 earnings and reserves as it exceeds 50 percent of the paid up capital of the company.
At present, dividend up to Tk. 25,000 received from the publicly traded company is exempted from tax. With a view to incentivizing the small investors and strengthening the capital
A provision was made in the income tax ordinance last year to avoid the multilayer taxation on dividend income. However, the application of the provision was limited only to
To promote foreign investment, I propose to extend the application of this provision to the non-resident companies as well.
Madam Speaker International Best Practice The volume and the nature of cross border transactions have significantly increased in the wake of progression of economic globalization, import
Currently, many non-resident taxpayers are doing business through permanent establishments.
Home countries of many of such non-resident taxpayers have double taxation avoidance treaties with Bangladesh. According to the treaties,
Value Added Tax Madam Speaker
Value Added Tax (VAT) is a modern indirect tax system. It is the single highest contributor to the NBR tax revenue. Reform initiatives, positive mindset of the taxpayers and hard work of the NBR officials have contributed to this achievement. Considering the growth of the national economy, demand, interest of the business community and the consumers I am now placing before this august House the VAT related proposals for creating taxpayer-friendly, revenue-friendly and development-friendly tax structure: Madam Speaker
The new Value Added Tax and Supplementary Duty Act, 2012 has been formulated in line with the best international practices. It will make a significant improvement in the “ease of doing business” index. Now, I am presenting some of the salient features of the new law: a) Taxpayers will have the opportunity to get online service for VAT and Turnover Tax registration, tax payment, return submission, refund; b) The existing price declaration system before the supply of goods will be abolished. The taxpayers will pay VAT on the basis of fair market price; 88 c) Currently there is a provision to maintain sufficient balance in the Account Current Register while supplying the goods. However, according to the new law, there is no such provision and the businessmen will be able to pay tax at the end of the month through the VAT returns; d) Wherever 15 percent VAT is applicable, the input tax credit can be obtained through the VAT return; e) Return will be treated as the application of refund. Madam Speaker.
As a gesture of our respect to the demands of our investors and business community, I am now proposing
corrections and additions to the Value Added Tax and Supplementary Duty Act, 2012 have been proposed; k) In line with the changes in the law, some necessary amendments
I am proposing to continue the existing VAT exemption facility in the case of government’s priority and fast track projects, such as the Bangladesh Economic Zone (BEZA) and the Public-Private Partnership (PPP) projects. In addition, I am also proposing to continue existing VAT and supplementary duty exemptions given to the heavy industries like automobiles, refrigerators, freezers, air conditioners, motorcycles, mobile industries, etc. for the growth and development of heavy domestic industry and export sector. 90 Madam Speaker
The government is following the principle of increasing the VAT net, reducing the exemptions gradually, keeping inflation under control and developing the local industry. For the sake of public interest and for the development of our local industry now I am placing a few proposals before this august House for VAT exemptions for FY2019-20, which are as follows: a) Considering the interest of poor and marginalized people, I am proposing to provide VAT exemption on the production and supply of bread, hand-made biscuits and hand-made cakes up to the value of Tk. 150 per kg; b) For incentivizing the agricultural sector, I am proposing to give exemptions on the local supply of agricultural machinery such as Power ripper, Power tiller operated seeder, Combined harvester, Low lift pump, Rotary
etc.; c) Providing VAT exemption on the rent of a business showroom run by women entrepreneurs; d) Providing VAT exemption on suppliers and electricity in Bangladesh Hi-Tech Park; e) Providing VAT exemption on the supply of natural gas, suppliers and electricity in the case of investment in Bangladesh Economic Zone (BEZA); f) VAT exemption for the investors of
I am proposing to impose VAT on the products such as plastic and aluminum items, soybean oil, palm oil, sunflower oil, mustard oil
I am also proposing to impose VAT on astrologists, marriage media services and on the supply of entertainment programmes, serials, drama, telefilms
To reduce the use of non-essential commodities and to protect the interest of the domestic industry I am proposing to impose a supplementary duty on he following products and services: (a) In order to improve the traffic congestion situation and develop the public sector transport system, 10 percent supplementary duty on issuance or renewal of all kinds of vehicles registration, route permit,
fitness certificates, ownership certificate
popular means of transportation among the very rich people. Therefore, I am proposing to increase the existing supplementary duty from 20 (twenty) percent to 25 ( twenty-five) percent on this service; (c) Imposition of 5 percent supplementary duty on ice-cream; (d) To increase the supplementary duty from 5 percent to 10 percent of the services provided through mobile phone SIM / RIM card.
Considering the health-risk and harmful effects of tobacco 92 products and to maintain compliance with global anti-smoking policy, we are committed to reduce the use of tobacco and maximize revenue collection from this sector: (a) I am proposing to fix the price of every 10 sticks of low segment cigarette at Tk. 37 and the supplementary duty rate at 55 percent. I am also proposing to fix the price of every 10 sticks of the medium segment cigarette at Tk. 63 and the supplementary duty rate to 65 percent while fixing the price of every 10 sticks of the high segment and premium segment cigarette at Tk. 93 and Tk. 123 respectively and keep the supplementary duty rate to existing 65 percent. (b) I am proposing to fix the price of 25 sticks of non-filter bidi at Tk. 14 and supplementary duty rate at 35 percent and to fix the price of 20 sticks filter bidi at Tk. 17 and supplementary duty rate at 40 percent. (c) Smokeless tobacco like Zarda and Gul are another two health hazardous items like cigarette and bidi. The detrimental impacts on health from consuming these items are even greater since these items are directly consumed. In order to reduce the consumption of smokeless tobacco products, I am proposing to fix the minimum retail price at Tk. 30 per 10 grams from zarda and Tk. 15 per 10 grams for
Import-Export Duty-Taxes Madam Speaker
Following factors have been reviewed in considering the proposals received from the stakeholders regarding import duty, regulatory duty, supplementary duty
I propose existing 06 (six) slabs of Customs Duty (0%, 1%, 5%, 10%, 15%, and 25%), 3% Regulatory Duty on goods having highest import duty, and existing 12 (twelve) slabs of Supplementary Duty (10%, 20%, 30%, 45%, 60%, 100%, 150%, 200%, 250%, 300%, 350%, and 500%) on import stage to continue in FY2019-20. Besides, existing 0% import duty will remain unchanged for importing essential goods like lentils, wheat, onion, edible oil, fertilizer, seed, raw cotton and raw materials for some industries.
Existing 0% rate will also remain the same for importing life savings drugs and medical equipment. However, for the protection of local farmers, existing highest rate of customs duty at 25% and recently imposed 25% regulatory duty will remain unchanged on rice import.
Now, I would like to present sector-wise elaborated proposals in this august Parliament: (A) Agriculture sector: Madam Speaker
The agricultural sector is a priority sector in Bangladesh. Zero rates are proposed to be unchanged for the prime ingredients of the agricultural sector, especially for fertilizer, seeds, insecticides. Concessionary rate of duty will be continued for agricultural equipment and spare parts.
Fish, Poultry and Dairy: Fish, Poultry and Dairy form one of the most important subsectors of agriculture. Government has been providing some tax benefits and incentives to this sector for the last few years. To ensure sustainable development in this sector, I propose these tax incentives and exemptions should continue and extend this benefit to some new raw materials and equipment. (Table-6 of Annexure-B). 95 (B) Industrial sector: Madam Speaker
Considering these aspects, our proposals of import duties and taxes on the industrial sector are (Table-7 of Annexure-B): (1) Milk Powder: At present, milk powder is importable on a concessionary Customs Duty (CD) the rate which is 5%. To protect the local dairy industry, I propose to increase this 5% CD to 10% on milk powder import. (2) Sugar: I propose to increase existing specific duty from Tk. 2000.00/MT to Tk. 3000.00/MT on import of raw sugar. For refined sugar, the specific duty will be increased from Tk. 4,500.00/MT to Tk. 6,000.00/MT. Regulatory duty will be 30% instead of 20% for both refined and raw sugar import. (3) Medicine: The quality of medicine produced in Bangladesh is internationally acclaimed.
It is one of the highly prospective export sectors in Bangladesh. We have a steep growth in medicine exports and that has been possible as the sector gets necessary facilities and required protection from the government. Exemptions and concessionary rate of duties of some pharmaceutical raw materials including that of cancer medicines have been proposed. Moreover, I propose to decrease regulatory duty from 20% to 10% on import of liquid Oxygen, Nitrogen, Argon and Carbon Dioxide for making these lifesaving gases available to the poor patients at low cost. 96 (4) Other Industries: To protect domestic industries, I propose to increase regulatory duty on Maize (corn) starch, Manioc (Cassava) starch and gypsum board import. I also propose to increase supplementary duty on import of particle board and domestic electrical articles. Moreover, I also propose to allow the import of some essential raw materials of lift, refrigerator, compressor, air conditioner, electric motor, mold and footwear industries at a concessionary rate. (5) Export Duty: Rice bran is the prime raw material of rice bran oil. As there is a huge demand from local rice bran industries, I propose to increase the export duty on rice bran from 10% to 25% to discourage exports. I also propose to withdraw the existing 10% export duty on unmanufactured tobacco and to decrease existing export duty of building bricks from 25% to 15%. (C) Transport sector: Madam Speaker
Motorcycle: In the transport sector, motorcycle manufacturing and assembling is a rapidly growing industry in Bangladesh. The government is facilitating the
Most of the products of the ICT sector have been enjoying a reduced rate of duties and taxes since As a result, the ICT sector developed significantly by this time. One of the main elements of the ICT sector is 97 cellular phone which is enjoying concessionary duty benefits on import of some raw materials and parts. Some (5-6) local manufacturers have already started manufacturing and assembling cell phones in Bangladesh. 10 percent customs duty is applicable on import of smart and feature phone.
As smartphones are used by affluent people, I propose to increase the customs duty on smartphones to 25 percent. However, customs duty of feature phone will remain unchanged as it is used by relatively poor people (Table-9 of Annexure-B). Madam Speaker
Lightning has become a natural disaster
We have experienced some fire incidents of huge scale recently. At present, only VAT registered industries can import firefighting equipment at a concessionary rate. To combat the rise of fire incidents, this facility should be extended to all and I propose to allow this facility to all VAT registered service
I propose necessary amendments in the
According to the Customs Act, 1969, duty-tax is not leviable where 98 value and total duty tax is less than BDT 2000.00 of an import consignment. In order to make this provision effective, I propose to form a de minimis rule to expedite import of samples with a simplified process.
To prevent gold smuggling, a reduction of duty of gold under Passenger (non-tourist) and Baggage (import) Rules-2016 and for commercial import, from BDT 3000.00/11.664 gm to BDT 2000.00/11.664 gm has been proposed (Table-11 of Annexure-B). Madam Speaker
Amendments in First Schedule of the Customs Act: We have observed that there are mistakes and inconsistencies in the existing structure of the tariff headings and H.S Code. In order to simplify international trade process, I propose to rationalize the inconsistent duty rates, creation of new H.S Code where necessary, deletion of wrong one and correction of H.S Codes and notifications. (Table-12 of Annexure B).
To combat under-invoicing, reduce consumption of luxury and socially undesirable goods and to protect goods produced by local industries minimum value and tariff value of some high duty imported goods have been restructured. Madam Speaker
The economic progress and development of Bangladesh are visible now. Bangladesh has become a role model for economic development. Revenue administration has to play a vital role to expedite this development. We expect more vigorous efforts in revenue mobilization if the reforms initiatives undertaken by the National Board of Revenue are implemented effectively. The economy will reach a new height and Bangladesh will be a middle-income country by 2021 and a developed one by 2041.
Conclusion Madam Speaker
The present government led by Hon’ble Prime Minister Sheikh Hasina has expanded the horizon of our dream and at the same time enhanced the capacity to translate it into reality. Assuming the responsibility of office in 2009, the present government declared the Vision 2021 to establish Bangladesh as a poverty-free, prosperous middle-income country. The government’s enviable capacity to realize this socioeconomic vision within the quickest possible time has already been proven. Through the implementation of the planned and inclusive development strategies of the government, the country has achieved a sustained and high rate of growth at
As a sequel of the Vision 2021, the present government brings before the nation a new Perspective Plan ‘Vision 2041’. We are determined to elevate Bangladesh from the status of a middle-income country and become a peaceful, happy and prosperous developed country by 2041.
In our long enduring journey towards development, we have come to a stage from where, if we look back, we will come across those hurdles and obstacles that came in the way. We have to go a long way still which is fraught with so many challenges. Madam Speaker, you are aware, a nation’s journey towards the future can never be easy and linear. However, we have enormous
We are still unrelenting in materializing the dream of establishing Sonar Bangla which will continue from one generation to another. This journey will be inspired by our national flag with red and green, our symbol of pride. Our future generation, our youth, the children of our liberation war heroes shall put the nation in the highest seat of glory and dignity among the nations of the world. Madam Speaker
(Taken from the budget speech made in Bangladesh Parliament by Finance Minister AHM Mustafa Kamal on Thursday, June 13, 2019. Most of the budget speech was read out by Prime Minister Sheikh Hasina on bealf of the Finance Minister as he was physically unwell.)