Budget aims at tax compliance, predictability: Experts

The revenue authorities have overhauled the tax rules for the upcoming fiscal year, offering significant relief to businesses and individuals, according to experts.

For instance, they said corporate tax for non-listed companies has been reduced to 25%, bringing it in line with rates in peer countries. The minimum tax has also been made adjustable, alleviating a previous burden on businesses.

Another relief for businesses is the reduction in the penalty for delayed tax return filings. Previously, they had to pay 4% interest on the payable gross tax, but this has now been lowered to 2%.

Besides, the government has also made the tax policy predictable, shifting from a retrospective to a prospective tax system, according to experts.  As part of this, the government has proposed a two-year tax rate, which will be applicable for the current fiscal and the next. 

The budget proposal will play a role in providing predictable taxation and will help increase the confidence of taxpayers and investors, said Snehasish Barua, partner at Snehasish Mahmud and Company, a chartered accountant firm.

He said the budget proposal includes a condition for extending tax exemption benefits for the IT sector for another three years, requiring all transactions to be conducted through banking channels. 

Similarly, for all other companies, it proposes that transactions exceeding Tk36 lakh per annum must be done through banking channels to get their corporate tax rate reduced, he said, adding that companies owed refunds due to advance tax can also adjust them in the next year.

He mentioned that these proposals aim to address some issues that businesses had complained about. "As a result, those with lower profits or losses will have an opportunity to reduce the effective tax rate."

The Income Tax Act passed last year also proposes to remove ambiguities in several areas. It abolishes the powers of field-level officers in assessing the tax files of company taxpayers, allowing companies to submit their tax returns through self-assessment starting next year.

In sectors like oil and gas, excessive source tax generates refunds. To avoid this, the proposal reduces the source tax rate in these sectors and treats it as minimum tax or final settlement.

Besides, capital gains exceeding Tk50 lakh in the stock market are now subject to taxation. Also, certain services such as hotels, restaurants, motels, convention centres, clinics, and diagnostic centres are now required to submit returns as part of efforts to broaden the tax base.

Zaved Akhtar, president of the Foreign Investors Chamber of Commerce and Industry (FICCI), told TBS that the budget reflects a progressive approach by focusing on tax reforms that simplify and clarify the tax regime.

Despite pressure from the International Monetary Fund to reduce exemptions, the revenue board has not moved to eliminate all exemptions, he said. Efforts to support industry and manufacturing, particularly local industries, have been observed. 

"However, there has been an increase in tax rates by limiting benefits on imported raw materials and capital machinery. Additionally, VAT has been raised for certain industries, signalling a gradual increase in tax rates," added the business leader.

In a statement, the FICCI president also said the proposal to reduce the corporate tax rate for companies not listed on the stock exchange from 27.5% to 25%, subject to compliance with cash transaction conditions, is commendable. 

"It is expected that the proposal to reduce the tax rate will encourage private investment," he said.