Govt cuts source tax on exports

The parliament yesterday gave the nod to the tax measures for fiscal 2016-17, bringing in some changes to Finance Minister AMA Muhith's original proposal made on June 2.

For instance, the source tax rate on exports has been cut to 0.7 percent from the proposed 1.5 percent and the investment limit for individual taxpayers has been increased from the proposed ceiling. Taxpayers will also get one more month to prepare their income tax returns from next fiscal year. The new deadline is November 30, instead of existing October 30.

“But the deadline will not be changed under any circumstances,” Muhith said after the house passed the Finance Bill 2016. The parliament brought further cheer to taxpayers by raising the investment limit to 25 percent of total annual income instead of proposed 20 percent.

The rise in investment limit will allow taxpayers to have more disposable income, said a senior tax official at the National Board of Revenue.

Even after the change, the amount of tax benefit will not be equal to the outgoing fiscal year's, when taxpayers got 15 percent tax rebate by investing 30 percent of their total yearly income.

The tax rebate benefit will reduce gradually for those who earn above Tk 10 lakh a year. Depending on the level of income and the amount of investments, the tax discount will be applicable in three slabs -- 10 percent, 12 percent and 15 percent for the next fiscal year.

There is also relief for exporters, who will have to pay 0.7 percent source tax on their export proceeds from next fiscal year, instead of proposed 1.5 percent.

“It means that exporters will have to pay only Tk 0.1 more than what they pay now,” Muhith said.

The revision came in the face of staunch opposition from exporters. “We welcome the decision,” said Siddiqur Rahman, president of Bangladesh Garment Manufacturers and Exporters Association.

Taxmen said collections of source tax will rise if the export receipts continue to grow.

In the first ten months of the fiscal year, Tk 1,332 crore was collected as source tax, which is already higher than the previous year's full year receipts of Tk 1,065 crore, according to the NBR. Multinational companies also got a waiver from preparing their annual accounts, taking July-June as income year. They will be able to maintain their accounts in line with their parent firms.

The NBR earlier said companies except for banks and financial institutions will have to make their accounts taking July-June as the income year.

CHANGES IN VAT RELATED PROPOSALS

In the face of criticism, the government also backtracked on its plan to realise 50 percent of the VAT amount for appealing against claimed amount or penalty imposed by revenue officials. Businesses can continue to file appeals against claimed VAT by paying 10 percent, as they do now.

Also, all e-commerce activities, including shopping online, will be free from VAT.

CHANGES IN DUTY RELATED PROPOSALS

The zero duty import benefit for several essentials such as edible oil, sugar, pulse, onion and garlic will also continue next fiscal year. Life-saving drugs will also enjoy zero-duty import benefit, after the proposal to impose 5 percent duty on them was withdrawn.

The import cost for liquefied petroleum gas will be 5 percent in fiscal 2016-17 instead of 10 percent.