Budget to help widen tax net: PwC

A number of tax measures proposed in the budget for the upcoming fiscal year will be instrumental in broadening the country's existing tax base and enhancing compliance, PricewaterhouseCoopers (PwC) Bangladesh said yesterday.

“Thanks to the measures, the tax collection will rise,” said Sushmita Basu, partner for tax and regulatory services of PwC Bangladesh, while sharing her analysis on budget proposals for 2018-19 at its office in Dhaka.

The global audit, tax and consulting service provider said some proposed measures such as withdrawal of multitier taxation on dividend income will provide relief to businesses.

“It is a good step. The provision of multitier taxation on dividend is very discouraging for good and big entrepreneurs,” Mamun Rashid, managing partner of PwC Bangladesh, said at the event.

PwC said the scope of income tax collection has widened because of some changes in the tax rules, particularly the one related to the definition of permanent establishment.

This revision will allow taxmen to collect tax on the income from the sales of any property in Bangladesh by nonresident companies or shareholders based outside of the country.

Basu said tax would be collected for the transfer of shares of a nonresident company if the value of the shares is directly or indirectly attributable to assets in Bangladesh.

Proposals to bring ride-sharing services such as Uber under the withholding tax will also widen the tax base, said PwC. 

Under the proposed measures, employers will have to submit a statement by April 30 to confirm the filing of tax returns by employees.

“Failure to file such a statement by any of the employees will attract disallowance of salary expense of the respective employees in the hands of employer,” said PwC.

Employees will also have to provide statement of return submission in this regard by April 15, said Basu, adding that this would increase compliance and thus tax collection of payrolls. Collection will grow higher once the tax system goes online, she added.

Rashid said many people are ready to pay tax. So, the automation of the tax administration will encourage new and potential taxpayers and improve compliance because of the scope to comply without facing hassles.

He said PwC has found in its primary research that 25 percent of the country's population, or 4 crore people, earn more than $6,500 annually. 

“The middle class is expanding. So, time has come to give them a break,” said Rashid, adding that policymakers should give the middle class some benefits so that they can invest and spend for consumption. Prabir Mitra, manager for tax and regulatory services of PwC Bangladesh, said proposals to introduce online filing of VAT return and payment of VAT will facilitate compliance.

PwC said input tax credit would be allowed when payment for purchase valued more than Tk 100,000 is made only through banks.

“This will help the government monitor the allowance of input credit and eliminate fake financial transactions,” said PwC.

Under the proposed measures, importers of service will now be required to obtain VAT registration.