MCCI demands scrapping conditions on cash transactions in corporate tax

The Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) has demanded scrapping the conditions on cash transactions in corporate tax.

The trade organisation alleged that traders are not able to avail corporate tax cut benefits due to the limits on cash transactions to get the benefits.

The MCCI raised the issue in a pre-budget meeting with the National Board of Revenue (NBR) at the NBR office in Dhaka today (4 March). NBR Chairman Abdur Rahman Khan was present at the meeting.

During the discussions, MCCI President Kamran Tanvirur Rahman said, "Although the corporate tax rate and effective tax rate have been reduced continuously in the past fiscal years, no one is able to enjoy this benefit due to the cash transaction conditions in the Finance Act, 2024. 

"Bangladesh's economy is 80% informal, and not fully dependent on banking. As a result, it is very difficult for large and medium companies to comply with those conditions." 

He also said the effective tax rate is extremely high, reaching 40-50% in some cases due to tax deductions at source and unauthorised expenses. 

"In addition to reducing the corporate tax rate, there is a need to reform the advance income tax and turnover tax policies so that the tax is based on income and not on turnover," he added. 

The MCCI president also emphasised the development of tax administration and the introduction of automated digitalisation to reduce tax evasion and increase revenue. 

The Foreign Investors' Chamber of Commerce and Industry (FICCI) also presented their budget proposals at the meeting. FICCI President Zaved Akhtar led the delegation while chartered accountant Snehasish Barua presented the proposals on behalf of the FICCI. 

Among the key proposals, the FICCI emphasised the importance of collaboration with the NBR to create a more integrated tax system that streamlines revenue collection processes. 

FICCI also recommended the recognition and establishment of a clear distinction between policy formulation and revenue collection to encourage greater efficiency, transparency, and fairness in the tax system. 

MCCI President Kamran also called for separation policy formulation and administration in the NBR.

"The MCCI believes that by separating tax policy and tax administration, it will be possible to formulate independent and transparent policies, which will be business and investment friendly. Waste and harassment in tax collection activities will be reduced and businessmen will get an easier and faster tax payment system. 

He also said it is necessary to include the business community in the policy-making process. 

In a statement after the meeting, the FICCI said the discussions focused on fiscal reforms aimed at creating an investment-friendly environment in Bangladesh. 

The chamber highlighted the need to shift towards a more robust direct taxation system. They proposed the establishment of a dedicated data and analytics team within the NBR to drive this shift, enabling more effective tax collection and compliance.

In an effort to attract more foreign investments, FICCI suggested optimising the effective tax rate by withdrawing thresholds for inadmissibility, rationalising Tax Deducted at Source (TDS), and gradually eliminating the minimum tax. These steps are aimed at creating a more competitive tax environment, ultimately fostering greater FDI inflow, it said.

Recognising the global shift towards sustainability, FICCI proposed introducing preferential tax rates and excise benefits to incentivise the development of green supply chains in Bangladesh. This would not only align with global trends but also position the country as a leader in green manufacturing, it said.

The FICCI also recommended the implementation of a unified VAT rate, focusing exclusively on value-added tax. This would simplify the VAT structure and reduce complexities for businesses while ensuring that the tax system remains efficient and equitable, it added.

To further streamline trade and ensure timely business operations, FICCI called for the faster resolution of issues related to imports and exports, reducing delays and increasing the ease of doing business in Bangladesh.