Where NBR aims to collect Tk70,000cr additional revenue from
Tax exemptions, also known as tax expenditures, have been reduced by Tk15,000 crore, bringing the total to Tk1.63 lakh crore.
The National Board of Revenue (NBR) has set an ambitious target to collect an additional Tk70,000 crore in the upcoming fiscal year, representing a 17.1% increase compared to the revised target for the outgoing year. But where will this extra sum come from? Let's break it down.
Higher costs for mobile, internet users
Talk time on mobile phones and internet usage will become more expensive as the supplementary duty (SD) increases from the current 15% to 20%. Currently, users get Tk75 worth of service for every Tk100 recharge, but this will decrease to Tk72 after the duty hike, according to budget documents presented in parliament yesterday. The NBR is expected to earn an additional Tk1,500 crore from the hike in SD.
Additionally, the VAT for a mobile phone SIM card will increase from the current Tk200 to Tk300, and the SD will rise to 20% from the current 15%, which, according to telecom operators, will increase their operating costs.
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Reduction in tax exemptions
Tax exemptions, also known as tax expenditures, have been reduced by Tk15,000 crore, bringing the total to Tk1.63 lakh crore. This reduction will come from cutting existing exemptions and minimising irregularities through stricter monitoring by tax authorities.
Higher taxes on cigarettes, sugary beverages
To discourage consumption, the government has increased taxes on cigarettes, carbonated beverages, and sugary items. The turnover tax on sweetened beverages has been increased to 3% from the current 0.6%, aligning it with the rate for carbonated beverages.
The supplementary duty on carbonated beverages has been raised to 30% from the current 25%. Cigarettes across all categories have faced higher taxes, with the government expecting to earn an additional Tk6,000 crore from this measure.
Expanded VAT system
The NBR has brought all business and service entities with annual transactions exceeding Tk10 crore under the system for deducting VAT at source in the upcoming fiscal year, aiming to collect an additional Tk5,000 crore in revenue.
Excise duty on bank deposits has also increased, with an additional Tk1,300 crore expected from this change. Services in amusement parks and theme parks face an increase in VAT to 15%, doubling the current rate.
Increased tariffs on oils
The tariff value of furnace oil, base oil, and lubricating oil has been doubled. This adjustment is expected to generate an additional Tk900 crore in revenue, addressing losses currently incurred due to misdeclaration by importers.
Broader tax net, increased duties
Auctioneers, security service providers, and lottery ticket sellers face an increase in VAT to 15% from the current 10%. The tax for brick makers has been doubled to 20%. Local air conditioner manufacturers now face a 7.5% VAT at the manufacturing level, up from zero. Additionally, manufacturers of refrigerators and freezers see an increase in VAT from 5% to 7.5% at the manufacturing level.
The source tax on imported fruits and flowers has been doubled from the current 5% to 10%. Before the Russia-Ukraine war, Bangladesh imported fruits worth nearly $450 million, according to central bank data.
The government has also raised import duties on at least 13 types of machinery, including air coolers and refrigerator compressors, chillers, lifts, CCTV cameras, and prefabricated building materials, from 1% to 10%. Additionally, import duties for CNG conversion kits, cylinders, and related machinery have increased, and the minimum tariff value for importing switches and sockets has risen by around 40%.
From economic zones, hi-tech parks
Investors in economic zones and hi-tech parks now face a 1% import duty on nearly all categories of capital machinery, ending their current duty-free status.
Furthermore, eight types of businesses and service providers, including hotels, restaurants, motels, hospitals, clinics, diagnostic centres, community centres, and convention halls, have been brought under the tax net and are required to submit returns when obtaining or renewing their licences.
Higher tax for high-income individuals
In the FY25 budget, the tax rate for high-income individuals has been raised from the current 25% to 30%, and a new tax slab has been introduced. These changes are expected to boost NBR's tax revenue.
Proof of submission of return expansion
Proof of Submission of Return has been mandated for eight additional business and service categories. Licencing organisations must verify PSR before issuing or renewing licences for these entities. This measure aims to bring a large number of TIN holders under the tax regime and include those who are still without a TIN.
Black money whitening
The government has introduced a provision in the next fiscal policy allowing black money to be legalised by paying a flat 15% tax with no questions asked. Additionally, companies can now legalise their undisclosed income at this rate, which is significantly lower than the current corporate tax rate of 27.5%. According to tax expert Snehasish Barua, this move will enable the NBR to bring in a substantial sum of money.
