Tax relief may widen for individuals, firms
The government plans to increase the minimum threshold for tax-free income in the upcoming budget after keeping the limit unchanged for two consecutive years.
The new tax exemption ceiling may be set about 14 percent higher at Tk 250,000 for fiscal 2015-16, said a finance ministry official. At present, individuals' incomes up to Tk 220,000 get the immunity.
“We are considering placing the proposal in parliament in view of the new pay scale for government employees and the rising costs of living due to inflation,” the official said.
In the last two years, Bangladesh recorded nearly 7 percent average inflation, stretching the wallets of the low- and fixed-income people.
Given the circumstances, a new pay scale has been put in place, which will boost the basic salaries of nearly 14 lakh state employees by almost 100 percent once it takes effect from July 1. Their allowances are also set to rise.
Officials said the services holders, especially those at the lower strata of salaries, will be unable to fully get the benefits of increased salaries unless the tax-free ceiling is raised.
Earlier, the Federation of Bangladesh Chambers of Commerce and Industry urged the government to hike the tax-free income limit for individuals to Tk 2.75 lakh from 2015-16. However, the minimum tax irrespective of location is likely to go up to Tk 4,000 from the next fiscal year.
Currently, taxpayers living in cities have to pay Tk 3,000 in minimum tax against their income. People living in district municipalities face Tk 2,000 in minimum tax and those living in suburban areas Tk 1,000.
Apart from the elevated tax-free ceiling, entrepreneurs may see a 2 percentage-point cut in corporate tax, which will be applicable to both listed and non-listed companies.
At present, corporate tax for non-listed companies is 35 percent, while it is 27.5 percent for listed companies.
“We are planning to propose the benefits to boost the capital market and reinvigorate the investment climate, which is now on the slow lane,” said the official.
However, the existing tax rate for banks, financial institutions, and insurance, mobile and cigarette companies may remain unchanged in the coming fiscal year in the backdrop of the government's increased revenue collection target.
Officials said even a minor reduction in the tax rate for these sectors, which together account for a fifth of the government's direct tax, would affect the revenue collection goal.
The surcharge on wealth tax will continue into the next fiscal year, but the lowest ceiling of net wealth may be revised upwards following calls from executives of private and multinational companies, whose retirement benefits nearly reach Tk 2 crore.
To attain the direct tax collection target of Tk 65,932 crore in the next fiscal year, the government may not extend the current privilege of source tax on garment exports.
The present 0.3 percent source tax on garment exports is set to go on June 30 this year. As a result, garment entrepreneurs may see a 0.8 percent source tax on their exports again.
The tax authority is looking to log in Tk 2,500 crore from the increase in source tax on clothing exports, said officials.
Earlier this month, Policy Research Institute (PRI), a private research organisation, suggested the government increase the tax rate on apparel exports in the upcoming budget.
It said the garment and textile sector is the most dynamic sector in Bangladesh but it is the most under-taxed sector as well. The tax rate on apparel exports was slowly increased from 0.25 percent of export volume to 0.8 percent in fiscal 2013-14, it added.
However, in order to mitigate the high costs incurred by the sector due to political unrest, the rate was temporarily cut down to only 0.3 percent in fiscal 2014-15.
“This rate should now go back to at least the original level of 0.8 percent in FY16 and should further go up in the coming years. The revenue impact from this move would be about Tk 600 crore,” PRI Executive Director Ahsan H Mansur said on May 9.