Govt likely to exempt excise duty on offshore banking to boost FDI

The government is planning to exempt the excise duty payment on offshore depositors' accounts or foreign lenders' accounts in offshore banking units of banks, aiming to attract foreign direct investments (FDIs) during the country's ongoing forex crunch, according to finance ministry officials. 

The ministry officials mentioned that the National Board of Revenue (NBR) has proposed to provide the exemption in FY2024-25 to encourage depositors to keep their foreign currency in offshore banking accounts amidst the crisis.

In 1985, offshore banking was introduced in Bangladesh through a circular from the Bangladesh Bank, primarily aimed at enhancing financing opportunities in Export Processing Zones (EPZs). 

Currently, the excise duty for offshore banking deposits is the same as deposits in other banking units. 

Excise duty on high-figure deposits will increase

The upcoming budget plans to increase excise duties on high-figure bank deposits starting next fiscal year. This government move aims to tax the well-off more heavily to help narrow the gaping income inequality, officials said.

They noted that no excise duty is currently applicable on balances of up to Tk1 lakh annually. 

In FY25, the excise duty of Tk150 on deposits above Tk1 lakh to Tk5 lakh and Tk500 on deposits above Tk5 lakh to Tk10 lakh may remain unchanged.

Currently, depositors pay Tk3,000 as excise duty on balances above Tk10 lakh to Tk1 crore. 

However, as the range is much higher and creates inequality among low-medium income groups and high-income groups, the government is going to split it into two parts. 

The excise duty of Tk3,000 may remain unchanged for deposit balances above Tk10 lakh to Tk50 lakh, but it may be increased to Tk5,000 for balances above Tk50 lakh to Tk1 crore.

Currently, an excise duty of Tk15,000 is deducted on bank deposits above Tk1 crore to Tk5 crore. This range may also be split into two parts. 

The duty may be increased to Tk20,000 for deposit accounts with balances above Tk2 crore to Tk5 crore, while decreased to Tk10,000 for balances above Tk1 crore to Tk2 crore. The existing excise duty of Tk50,000 on balances above Tk5 crore may remain unchanged, officials say. 

Earlier in the budget of the outgoing fiscal year, the government increased excise duty on the higher ceiling of bank deposits by Tk10,000 from Tk40,000.