Chartered accountants yesterday urged the government to cut the corporate tax by 2 percentage points across the board to tempt both local and foreign investors with the view to pulling the country out of its stagnant investment scenario.
“One of the first questions that investors ask before taking investment decision in any country is the rate of corporate tax,” said AF Nesaruddin, president of the Institute of Chartered Accountants of Bangladesh (ICAB), at its office.
And Bangladesh has the highest corporate tax rate among South Asian nations.
The country has eight rates of corporate taxes, starting at 25 percent for listed companies and going up to 45 percent for cigarette manufacturers.
Some 35 percent tax is applied to non-listed companies and higher rates of taxes are slapped on banks, financial institutions and mobile phone operators.
In contrast, tax rates in South Asian countries, including India, hover between 15 percent and 30 percent, according to the ICAB.
So the corporate tax should be reduced, Nesaruddin said at a press conference organised to share the ICAB's budget recommendations for next fiscal year.
“It would not be possible to create enough jobs and accelerate economic growth without higher foreign and local investment. We have to increase both revenue collection and investment,” he added.
Many counties are bringing down corporate tax rates to encourage investment, said Md Humayun Kabir, a former president of the ICAB. “Revenue collection will increase in the long-run because of increased investment following a rate cut,” he said, while advising the National Board of Revenue to take up a five-year plan to bring down corporate tax rates gradually.
For individual taxpayers, the ICAB recommended the tax authority impose 5 percent tax on the second slab of income instead of 10 percent at present.
It suggested 25 percent tax as the highest rate for individual taxpayers instead of 30 percent.
The ICAB also suggested simplifying the tax return form and offering 15 percent tax rebate on 25 percent of income so that individual taxpayers can calculate tax rebates easily.
Instead of increasing the tax burden on existing taxpayers, it is important to increase revenue through widening the tax net, it said.
Only 16 lakh out of Bangladesh's total population of 16 crore pay income tax, Nesaruddin said.
“It is essential to increase the number of taxpayers and the amount of income tax as we head towards becoming a middle-income country.”
He suggested digitalisation of the revenue administration, saying the scope of tax evasion is low in digital era.
“Tax reform is the need of the hour,” he said, adding that there is fear among people about the tax administration.
Subsequently, it is necessary for the government to take steps to increase transparency, modernise tax administration and reduce the hassle of taxpayers.
Citing the value added tax (VAT) law framed in 2012, he said a large number of firms are yet to register online for the Business Identification Number.
Ensuring their registration and encouraging them to submit returns are imperative, Nesaruddin added.
The contribution of micro and small businesses is huge, the ICAB said, while suggesting an increase in tax-free turnover limit for them to Tk 48 lakh from existing Tk 36 lakh.
Snehasish Barua, a member of the taxation and corporate laws committee of the ICAB, also spoke.