CPD proposes corporate tax instalments, bonuses for health workers

The Centre for Policy Dialogue, Bangladesh's leading think-tank, yesterday came up with a comprehensive proposal for fiscal measures to face the fallout of coronavirus that includes Vat waiver for agro-based industries, payment of corporate tax in instalments, and increasing income tax slabs for individuals.

It also said those working on the coronavirus frontline such as doctors and nurses should be incentivized with extra bonuses.

Fiscal Measures for Agro-based Economic Activities

The CPD said the NBR may consider several fiscal measures for the affected agro-based industries which could include waiver of VAT at the domestic stage for the period March-June, 2020, deferred payment of quarterly advance income taxes till June, 2020, and payment of corporate taxes for FY2020 by instalments till March, 2021.

These waivers could be continued in FY2020 budget. Besides, companies which are in loss-making position during FY2020 may be allowed to 'carry back losses' against the taxable profits for the two previous years:  FY2018 and FY2019.

It suggested low interest credit for farmers producing perishable goods such as chillies, cauliflowers, leaf vegetables and tomato were affected by drop in sales, low market price and disruptions in the movement of goods to wholesale markets.

In view of urban to rural migration and lower number of workers going abroad for overseas jobs, it is likely that there will be increased pressure on rural labour market.

And so the CPD suggested that NBR may consider following 'go slow' policy as regards incentivising labour-displacing mechanisation. Further reduction of duties at import stage for agricultural machineries should be stalled perhaps till FY2022.

Similarly, disbursement of credit at subsidised rate to farmers for agricultural mechanisation should be slowed down in the next one year.

Proposals for Fiscal Measures for Manufacturing and Service Sectors

The CPD said the government's Tk.5000 crore package for export-oriented industries should include enterprises exporting below 80 per cent of their production (and those do deemed exports) such as textiles, accessories, processed and frozen food, footwear, pharmaceuticals, plastic and ceramic etc.  

Besides, the NBR may consider a number of support measures which include increased depreciation of assets for companies for two years: FY2020 and FY2021, special reduced rate of VAT for the domestic purchase of goods and services for six months, relief from penalties and interest for tax-related payments till December, 2020, deferred payment of quarterly advance income taxes till June, 2020 and relief of VAT during the period of January-June, 2020 for travel and tourism sectors/related activities.

The NBR should consider allowing domestic and export-oriented companies to pay their corporate taxes for FY2020 in instalments, perhaps by March, 2021. Besides, companies may be allowed to 'carry back losses' that are in a loss-making position in 2020 against the taxable profits for the two previous years (FY 2018 and FY2019).

Considering the adverse financial condition facing particularly by cottage, micro and SMEs, the NBR may consider raising tax exempted yearly turnover limit for SMEs from Tk. 50 lakh to Tk. 1.0 crore for the year FY2020 and FY2021. Indeed, domestic market-oriented industries, particularly cottage and MSMEs, need a special package with a revolving loan fund facility at a subsidised interest rate.

The NBR can consider a reduced rate of corporate taxes against the earnings during fourth quarter (March-June, 2020) of the FY2020 and first quarter (July-September, 2020) of the FY2021 for pharmaceutical companies, hospitals, clinics, and other health facilities that are involved in the production of medicines and in prevention, diagnosis, control, attention, and treatment. Besides, it may consider introduction of tax credits for amounts paid by businesses to sanitize work premises for FY2020.

Doctors, nurses, and other support staffs working in hospitals with corona patients and related matters may be incentivised through offer of special financial package either through one-time bonus (in public entities) or through reduced rate of taxes on their income (in private entities) for FY2020. Hospitals, clinics, diagnostics, and laboratory involved in corona related treatment and research should get a waiver as regards advance income taxes for the period of March, 2020 to June, 2020.

Grants or donations in cash for the prevention, diagnosis, control, attention, and treatment of the COVID-19 in favour of authorized public and private hospitals and clinics, should not be considered taxable for FY2020.

Proposed Fiscal Measures at the Individual Level

In the FY2021 budget, the NBR should raising the tax-free income threshold levels from Tk.250,000 to Tk.350,000. Besides, it may consider restructuring the first three slabs of income tax from 10 per cent, 15 per cent, and 20 per cent to 5 per cent, 10 per cent, and 15 per cent respectively at least for next two years. Moreover, NBR may consider allowing payment of individual income taxes for FY2020, by instalments, by March 2021.