Govt may lower corporate tax to encourage compliance
The government may reduce the corporate tax rate in fiscal 2024-25 in a bid to encourage compliance and boost collection, according to officials of the finance ministry.
As such, the National Board of Revenue (NBR) will likely propose reducing the tax on corporate profits by 2.5 percentage points for both listed and non-listed companies.
The government currently charges income tax amounting to 27.5 percent of the annual income registered by non-listed companies.
Meanwhile, listed companies that have issued shares worth more than 10 percent of its paid-up capital through initial public offering face 20 percent tax on their income.
On the other hand, listed companies that have floated shares worth less than 10 percent of their paid-up capital are subject to 22.5 percent income tax.
In case of failure to comply with regulations, the rate is increased by 2.5 percentage points as a penalty for all three types of companies.
However, the NBR is now considering whether to reduce the income tax for non-listed firms to 25 percent tax, said an official of the finance ministry on condition of anonymity.
"We are considering the tax cut to encourage compliance and gradually move towards cashless transactions," the official added.
Asked about the potential tax reduction for listed companies, the official declined to comment in this regard, saying that they have yet to reach any decision to this end.
While placing the budget for the current fiscal year, the immediate past Finance Minister AHM Mustafa Kamal said the corporate tax rate has been reduced every year from fiscal 2020-21 to fiscal 2022-23.
In fiscal 2021-22, the corporate tax rate was slashed to 30 percent from 32.5 percent for non-listed companies while it was reduced to 22.5 percent from 25 percent for listed ones.
Besides, the government is also planning to increase the revenue collected from high-income individuals by increasing income tax on the segment to 30 percent from 25 percent for the next fiscal year.
If it is approved in the next budget, which is scheduled to be placed in parliament in June, then the tax rate will return to its pre-pandemic level, finance ministry officials said.
The government revenue authority is planning fiscal measures like raising the tax rate on higher-income people to contain the country's gaping income inequality, they added.
The NBR currently collects individual income taxes in five brackets.
Above the tax-free annual income threshold of Tk 3.5 lakh, rates are structured as follows: 5 percent on income up to Tk 4.5 lakh, 10 percent on income up to Tk 7.5 lakh, 15 percent on income up to Tk 11.5 lakh, 20 percent on income up to Tk 16.5 lakh and 25 percent on income of more than Tk 16.5 lakh.