Prime Minister Sheikh Hasina’s Directives on Upcoming Budget
In a move to shield consumers from the brunt of high food inflation, Prime Minister Sheikh Hasina has instructed the National Board of Revenue (NBR) to refrain from increasing taxes on essential food items, agricultural products, and fertilizers. This directive comes as the NBR contemplates a 2.5% reduction in corporate tax for non-listed companies, bringing it down to 25%, contingent upon conducting transactions through banking channels.
The proposed Tk8 lakh crore budget for FY25, approved by the prime minister, also hints at potential cost hikes for mobile phone and internet users. The NBR is considering raising the supplementary duty on talk time and internet services, which are already subject to some of the highest duties globally.
Further changes may affect members of parliament directly, with the potential withdrawal of duty-free vehicle import benefits and the introduction of a proposed 25% customs duty. This marks a significant shift from the current tax rate, which can reach up to 800% for general importers.
Corporate Tax Cuts and Mobile Sector Tax Increases
The NBR’s meeting with Prime Minister Sheikh Hasina revealed a strategy focused on incentive-driven tax policies. Companies adhering to formal transaction requirements above a certain threshold may benefit from lower tax rates. This approach aims to formalize economic activities and encourage compliance.
However, the mobile sector could face additional burdens if the NBR’s plans to increase supplementary duties are enacted. With current taxes exceeding 33%, any further increase would place more strain on consumers, particularly those with lower incomes. Industry stakeholders have voiced concerns that such measures could hinder the sector’s growth and contradict the government’s digital initiatives.
Despite these challenges, the NBR remains optimistic about the potential revenue gains from increased mobile sector taxes, which could amount to an additional Tk1,000 crore. The mobile phone sector is a significant contributor to the NBR’s revenue, following only tobacco in VAT and supplementary duty payments.
Challenges in Tax Policy Implementation
While the government’s efforts to reduce corporate tax rates are intended to stimulate business development, the complexities of transitioning to a formal economy present hurdles for many companies. Strict conditions and limitations may prevent a substantial number of businesses from benefiting from these tax cuts.
The NBR has not yet projected the potential exemptions resulting from the corporate tax reduction. Their primary goal remains to encourage formal economic practices among businesses.
As Bangladesh navigates these fiscal policy changes, businesses and consumers alike will be closely monitoring the impact of these decisions on investment types and the broader economic landscape.
