Tax hikes in budget to tighten grip on middle class: ICAB

The government's new budget proposals, especially the higher tax rates for individuals and companies, will increase pressure on existing taxpayers, putting fresh strain on the middle class, according to the Institute of Chartered Accountants of Bangladesh (ICAB).

Speaking at a post-budget press conference at the ICAB office in the capital's Karwan Bazar today (4 June), Snehasish Barua, an ICAB member and partner at Snehasish Mahmud and Company, outlined how the proposed personal income tax changes could affect taxpayers.

He said under the proposed changes, the tax-free income threshold for individual taxpayers will be raised by Tk25,000 to Tk375,000. However, this will take effect during the filing for the following fiscal year. At the same time, the removal of the 5% tax bracket and the imposition of a 10% rate from the outset is expected to disproportionately impact lower-middle-income taxpayers.

The budget also proposes a sharp increase in turnover tax for all companies, from 0.60% to 1%, representing a 67% hike. Additionally, the tax rate for non-listed companies on the stock market has been raised by 2.5 percentage points to 27.5%, said Snehasish, labelling the revised turnover tax as a regressive measure that will raise operational costs for businesses.

ICAB President Maria Howlader echoed these concerns, calling the turnover-based tax increase "alarming" for the business community. 

"Raising the minimum tax on turnover from 0.6% to 1% goes against sound tax policy. Taxes should be levied on taxable profits, not merely on turnover. This provision should be withdrawn," Maria said.

ICAB's former president, Mohammed Humayun Kabir, said that approximately 25,000 companies currently file tax returns, and the increased turnover tax could negatively impact nearly two-thirds of them.

ICAB members also noted that doubling the source tax on rent payments would increase pressure on companies.

ICAB also welcomed several positive measures in the budget. 

It praised the withdrawal or reduction of import duties on various products, particularly as a strategic move to secure bilateral benefits from the United States, and the reduction of duties on petroleum imports.

ICAB described some budget initiatives as "good moves," including making the new tax rates applicable prospectively for two years, allowing minimum tax to be carried forward for adjustment against future profits, and halving the VAT on the supply of essential goods.

Snehasish Barua pointed out that due to sluggish revenue collection in the current fiscal year (FY25), the government set a fresh target with around a 36% increase in revenue for the upcoming fiscal year.

Former ICAB president Md Moniruzzaman and council member-elect Mohammad Abdul Ohab Miah also attended the press conference.