PM directs business-friendly tax regime, not burdening poor

Prime Minister Tarique Rahman has instructed tax officials to design a business and investment friendly, predictable tax regime in the upcoming budget, while ensuring no additional tax burden is placed on low-income groups.

He also stressed that tax exemptions should be limited to sectors that contribute to the economy, discouraging tax exemptions that fail to deliver benefits to end users.

TBS infographics

He issued the directives yesterday (14 May) during a meeting with National Board of Revenue (NBR) officials on income tax, VAT and customs duties, according to officials present.

They said that while a few minor tax relief measures may be introduced in the FY27 budget, several sectors are likely to face higher taxes, particularly for high-income groups. 

Meeting sources added that approval came for several NBR proposals, including a wealth tax initiative, which is expected to generate significant revenue from high-net-worth individuals.

Among other key approved measures is the exemption of excise duty on bank deposits up to Tk5 lakh. Besides, VAT may be introduced on liquor produced by Carew & Company. 

Also, opening a bank account will require a Business Identification Number (BIN), while BIN  issuance will be made instant without VAT authority approval. New taxes may also be introduced on motorcycles and battery-run auto-rickshaws.

The meeting also discussed maintaining a stable personal income tax structure until 2030, which may be reflected in the upcoming budget.

Former NBR Chairman Muhammad Abdul Mazid told TBS that the government needs to increase revenue, but without placing additional pressure on low-income groups.

He said one of the key ways to raise revenue is strengthening NBR's capacity and reducing tax evasion, stressing the need for effective measures to curb leakage in the system.

The meeting was attended by the finance minister, the NBR chairman and senior budget officials. It began at 10am and ended at 6pm. Officials said Tarique reviewed detailed proposals and provided policy guidance throughout the session.

The government aims to collect Tk6.04 lakh crore through the NBR in the next fiscal year by expanding the tax base and increasing rates in selected areas. An additional Tk91,000 crore is expected from non-NBR and non-tax revenue sources.

Wealth tax, excise duty

An NBR official, speaking on condition of anonymity, told TBS that the prime minister had approved the long-discussed proposal to introduce a wealth tax. 

Currently, individuals or entities whose declared assets in tax filings exceed Tk4 crore are subject to a surcharge of up to 35% on payable tax. However, under a wealth tax regime, tax would be levied directly on the net value of assets.

Tarique also approved a proposal to provide some relief for low-income depositors in relation to excise duty deducted on bank deposits.

At present, excise duty is deducted on bank deposits exceeding Tk3 lakh for any individual or institution. This threshold may be raised to Tk5 lakh.

The prime minister also gave green signal to maintaining the individual taxpayer structure through 2030, with possible adjustments to provide limited relief. 

The current tax-free income threshold is Tk3.75 lakh, which is set to expire in the FY28. Under a new proposal approved by the prime minister, the threshold may be raised to Tk4 lakh from FY29, and kept unchanged for the next five years.

Although the NBR had plans to increase taxes at local and import stages on several essential goods such as rice and pulses, no approval was given. As a result, tax increases on these items may not be implemented.

Tax incentives linked to jobs, economic contribution

Another NBR official said the prime minister had stated that tax incentives may be granted to businesses and investments that contribute to the economy, particularly in terms of employment generation, commitment and output.

Tarique directed that this principle be reflected in NBR's tax policy formulation process.

He added that tax incentives should not be designed in a way that benefits only a single entity. Instead, they should be structured so that entire sectors can access the incentives.

He also noted that tax relief should be redirected from unskilled labour-based industries towards skilled and technology-based industries, with appropriate policy support to promote such sectors.

The prime minister also discouraged consumer-targeted tax exemptions that fail to reach end consumers and instead benefit specific business groups.

Exemption burden

According to officials, the PM's overall direction was to rationalise existing tax exemptions rather than abolish them broadly, ensuring that incentives are based on measurable contributions to the economy and employment.

Bangladesh continues to face pressure from the International Monetary Fund (IMF) to withdraw broad-based tax exemptions and raise tax rates across several sectors. 

In a recent meeting in Washington in February, IMF urged Bangladesh to phase out widespread exemptions and increase the tax-to-GDP ratio to 9.2% by FY27, up from 6.7% in the previous fiscal year. However, the government has not agreed to the conditions.