Revenue reforms body for tax holiday abolition

The revenue reforms commission has suggested that the government withdraw the tax holiday system, enhance the income tax exemption limit from Tk 75,000 to Tk 100,000, close down the bonded warehouses for diplomats and EPZs, and bring 31 new sectors under the tax net.

The commission has also recommended doubling of the tax -GDP ratio, lowering of corporate tax for companies listed with the capital markets, and increasing the dividend amount applicable for income tax.

The eight-member high-powered commission headed by Mir Mostafizur Rahman, former finance secretary, submitted its interim report to Finance Minister M Saifur Rahman yesterday afternoon.

"We would examine the report and see how far we can implement it in the socio-economic context of the country," M Saifur Rahman told the newsmen after receiving the report.

"Although we would review the budget next month, I do not see much scope for bringing major changes in the fiscal measures if income and expenditure of the government remain on target," he said when asked whether the recommendations would be incorporated in the current budget.

Responding to another query regarding the adverse impact that will follow the withdrawal of tax holiday in the country's industrial sector, the finance minister said that the commission made the suggestion because it was being misused.

In addition to that, the commission observed that such facilities did not bring any benefit to other countries, he added.

The minister said the commission found various loopholes and leakage in the government's revenue collection systems and revenue administration. "The government cannot hope for national development with such loopholes and low revenue earning," he said referring to the observation made in the report.

"The interim report focused almost on all areas, giving main thrust on eliminating the loopholes in revenue collection and increasing income of the government," said Mostafizur Rahman while talking to the newsmen after submission of the report.

Some other members of the commission including FBCCI President Yussuf Abdullah Haroon, Prof. Abu Ahmed of Dhaka University and Mahbub Ullah of Chittagong University were present when the report was submitted.

Chairman of the National Board of Revenue (NBR) Shoiab Ahmed was also present during the submission. The members of the commission held an hour long meeting with the minister after submitting the report.

The report has recommended that the government impose Value Added Tax (VAT) on 18 service sectors, 12 import items and one domestic manufacturing sector-- -ball pen. The service sectors include bank credit cards, ATM, discount cards, coaching centres, posh clubs, immigration services, legal and medical services.

Without suggesting a tax rate or giving the full list of the items to be brought under the tax net, Mostafizur Rahman said that 15 per cent VAT should be imposed on 12 import items, and a lump sum (unspecified) on other sectors.

Regarding their suggestion of closing the bonded warehouses for the diplomats and Export Processing Zones (EPZs), Rahman said that the commission deems the warehouses unnecessary because the diplomats can bring goods without any duty.

He said the tax-GDP ratio in the country should be doubled from existing 2.2 per cent, as around 25 lakh citizens have the capacity to pay income tax.

According to him there are only four lakh active income tax payers in the country. The loss to be incurred due to enhancement of the exemption limit would be compensated through marginal upgrading of rates in upper slabs.

Regarding withdrawal of the tax holiday system, Rahman said that instead of complete waiver from income tax, the commission suggested imposition of a nominal income tax for a new industry, which would be increased gradually.

The final report of the commission would be submitted in June this year. The commission was formed in August last year for suggesting measures for bringing discipline in the revenue sector of the government.