Finance Minister AHM Mustafa Kamal has proposed enacting a new provision to the income tax ordinance to offer Bangladeshis scope to legalise unreported offshore assets without facing any questions from authorities.
The initiative opens a path to reintroduce assets taken offshore back to Bangladesh’s economy, he said in his budget speech for the 2022-23 fiscal year on Thursday.
The minister proposed a 15 percent tax on immovable property located abroad, and a 10 percent tax on movable property if it is not brought back to the country. He also proposed 7 percent tax on remittances coming into Bangladesh. The privilege will remain in effect from July 2022 to June 2023.
He also proposed a reduction in the corporate tax rate for listed and unlisted companies in the new budget.
“I propose cutting the tax rate for unlisted companies from 30 percent to 27.5 percent and from 25 percent to 22.5 percent for one-person companies to incentivise the formalisation of the economy and establishing OPCs.”
All earnings, along with spending and investments over Tk 1.2 million, have to be shown by bank accounts, he said.
The government reduced the corporate tax rate to 30 percent from 32.5 percent in the 2021-22 fiscal year.
“For listed companies with 10 percent IPO, I propose to cut the tax rate from 22.5 percent to 20 percent, but companies with less than that will be subjected to a tax rate of 22.5 percent,” he said.
The budget also proposed raising the tax rate for companies failing to meet these conditions from 22.5 percent to 25 percent.
“I am proposing to reduce the rate of tax deduction at source on supply of trading goods from 7 percent to 5 percent and the rate of tax cut at source on the supply of books, barring government supply, from 7 percent to 3 percent.”
He suggested bringing down the rate of tax deduction at source for supplying raw materials to manufacturers to 4 percent from 7 percent in an effort to cut production expenses.
Mentioning the government’s aim to rationalise the tax rate along with expanding the foundation, he said,
“I suggest lowering the rate of tax deduction at source from 12 percent to 10 percent for taxpayers within the country on their earnings against services they provide.”
The finance minister also suggested excluding the service charges of mobile financial business from taxation at the source.
Regarding the easing of the expenses of construction projects, Kamal proposed lowering the tax rate on importing HR coil and zinc alloy, which are used for the production of galvanised iron sheet or steel materials, from 5 percent to 3 percent.
Kamal also proposed the scrapping of advance tax on gold imports in a bid to stop smuggling.
“This will greatly develop the jewellery industry and boost the government’s tax revenue.”
He also pushed to extend the existing 15 percent tax rate on textile industries, which was due to expire this financial year, to Jun 30, 2025.
Kamal then put the spotlight on expanding the taxation net by increasing the number of return submissions.
He suggested several provisions, which include mandating proof of submissions in several cases and introducing a law to cut off services including gas, power, and water among others in case of failure to pay the government’s undisputed revenue claims.
Mentioning taxation at the source as the root of collecting tax revenue and the significance of rationalising it, he said, “Considering the existing corporate tax rate, I propose raising the bank interest of source tax to 20 percent from 10 percent for taxpaying companies and source tax on exported goods to 1 percent from 0.5 percent.”