Corporate tax reductions to make taxpayers more tax-compliant

The corporate tax rates in both public and private sectors have been proposed to be reduced by 2.5% from the existing rates, which would help attract much more foreign direct investments in Bangladesh. Most importantly, this move will encourage taxpayers to be much more tax-compliant.

The tax rate for mobile financial service (MFS) providers has been proposed at 40%, the same as the banking and insurance sectors. This might have been more beneficial to companies had the tax deduction at source been reduced.

This is quite laudable to acknowledge the fact that to promote the operation of one-person companies, the tax rate has been proposed at 25%. Last but not the least, the tax rate for private universities, medical colleges, and engineering colleges has been recommended to be set at 15%.

The proposed budget has kept the personal tax rate unchanged. But in terms of application of surcharge, individuals having net personal wealth worth over Tk50 crore will have to pay a 35% surcharge on assets, up from the current 30%.

The government has also proposed raising the minimum surcharge threshold, offering some relief to comparatively less wealthy individuals having assets worth up to Tk10 crore. On the other hand, the surcharge-free limit of assets will remain unchanged at Tk3 crore.

The government has taken a very unprecedented move to empower the people belonging to the transgender community through creating tax incentive facilities for employers. Accordingly, they have been brought under the tax net for whom the tax-exempt threshold level is Tk3,50,000.

As for tax incentives for employers, they may be entitled to a 5% tax rebate on tax payable on the lower 75% of the total salary paid to transgender employees, provided they accommodate at least 10% transgender employees or more than 100 in the total workforce.

The government is still taking measures to promote companies engaged in IT-enabled services. To fulfil its mission to make Bangladesh a digitally progressive country, services such as cloud service, system integration, e-learning platform, e-book publications, mobile app development, and IT freelancing have been recommended to be kept outside the tax net.

Apart from that, to boost local industries and eliminate import dependency in the IT sector, manufacturers of IT hardware, such as motherboard, UPS, speakers, sound systems, and USB cables, will be entitled to enjoy a tax holiday period of up to 10 years. Furthermore, entrepreneurs engaged in the production of different industry-related machinery shall be entitled to enjoy a tax holiday period of up to 10 years.

Moreover, in the proposed finance bill, products tagged as Made in Bangladesh will be entitled to enjoy tax holidays for significant years. Such a move to incentivise the sectors will definitely make Bangladesh a self-sufficient country in the near future.

The automobile industry (production of three- and four-wheelers) is likely to enjoy a tax holiday period of up to 20 years, provided there is at least Tk100 crore investment in this mega sector. Besides, the production of home appliances, i.e. washing machines, electric sewing machines, and kitchen appliances, such as blenders, microwave ovens, and induction cookers, are likely to enjoy a tax holiday period of up to 10 years. This move to incentivise the sectors will similarly make Bangladesh a self-reliant country in the near future.

The government has also focused on the agriculture sector to help prospective entrepreneurs and the economy flourish. Investment in agro-based sectors, such as agri-processing, fruit processing, milk and dairy production, and farm machinery manufacturing will be entitled to a tax holiday period of up to 10 years. Tax incentives in this sector will surely help reduce Bangladesh's unemployment problem.

In addition to that, focus has also been given on increasing capacity building and upskilling human resources so that the resources are fully compatible to contribute to the multidimensional industrial sectors and to discourage foreign technicians in the local industry at the same time.

Therefore, institutions that will be engaged in giving vocational training and enriching the bandwidth and the capacity of the people in the fields of agriculture, fisheries, science, and IT shall be entitled to enjoy a tax holiday period of up to 10 years. 

The facility will also be applicable to institutions providing professional training in automobile, aircraft storage, food, footwear, glass, mining, mechanical, shipbuilding, refrigeration, ceramics, mechanist, garment design and pattern making, pharmacy, nursing, integrated medical, radiology and imaging, ultrasound, dental, animal health, production service, cloaking and garment finishing, and poultry farming. 

As part of tax incentives given to entrepreneurs, institutions registered with the NGO affairs bureau will be entitled to tax relief on income generated from the application of microfinance funds. 

This is undeniable that the current worldwide pandemic has exposed the deep-rooted vulnerabilities of the country's existing healthcare infrastructure. To help address this problem, the budget has introduced a 10-year tax holiday for new hospitals being constructed outside Dhaka and having a minimum capacity of 250 beds.

Women entrepreneurs' annual turnover eligible for tax exemptions has been increased from Tk50 lakh to Tk70 lakh.

Snehasish Barua is a founding partner at Snehasish Mahmud & Co