ICAB terms proposed budget business-friendly, welcomes steps to broaden tax net

The Institute of Chartered Accountants of Bangladesh (ICAB) has described the proposed national budget for the 2025–26 fiscal year as strategic and business-friendly, praising several tax and policy measures while also offering a number of suggestions for further improvement.

In a press statement today (2 June), ICAB congratulated the government led by Chief Adviser Muhammad Yunus and thanked the finance minister for placing what it called a "time-befitting" and well-analysed budget.

The proposed budget amounts to Tk7,90,000 crore, equivalent to 12.7% of the country's Gross Domestic Product (GDP).

Despite challenges posed by high inflation, global economic instability, and political changes at home, the government has proposed a development expenditure of Tk2,30,000 crore.

ICAB termed this an "encouraging step" for a developing economy like Bangladesh.

Focusing on revenue mobilisation, ICAB welcomed the government's intent to expand the tax net and expressed confidence in the Document Verification System (DVS), a joint initiative between ICAB and the National Board of Revenue (NBR).

"We believe DVS will significantly facilitate achieving the targeted revenue," the statement said.

The institute appreciated several changes proposed in the Income Tax Act.

These include the forward-looking announcement of tax rates for the next two assessment years and the reclassification of minimum tax, which can now be carried forward for adjustment in future liabilities.

ICAB also noted that the switch from monthly to quarterly withholding tax returns would ease compliance costs for businesses.

The rise in the corporate tax rate to 27.5% for cashless companies, excluding some publicly listed ones, was viewed as excessive. ICAB recommended that the rate be capped at 25%.

ICAB also praised the alignment of banking regulations with international accounting standards and highlighted the reduction in tax deducted at source (TDS) on essential goods from 1% to 0.5% as a "big relief" for consumers.

Additional reforms welcomed by the institute include tax relief on electric vehicles, lower tax rates for brokerage commissions and merchant banks, and the removal of taxes on mismatches in investment, import, and export records.

However, ICAB urged the government to reconsider certain issues such as the increase in turnover tax from 0.6% to 1% for businesses and from 0.25% to 1% for individuals.

It also recommended raising the initial threshold for tax-free income and reintroducing the 5% tax slab to make the system more progressive.

Regarding value-added tax (VAT) and supplementary duty, ICAB appreciated the reduction of advance tax on raw material imports, longer deadlines for tax credit claims, and the acceptance of company ERP systems as official VAT records.

On the other hand, it expressed concern over the hike in advance VAT on commercial imports to 7.5% and the jump in VAT on online sales commissions from 5% to 15%.

ICAB also commented on key changes in the Customs Act 2023, welcoming the withdrawal and reduction of import duties on a range of goods and the extension of advance ruling validity from 18 to 36 months.

However, it advised caution in imposing regulatory duties on essential commodities, including healthcare products.

ICAB stated that the proposed budget, while not without its challenges, "will help Bangladesh move toward becoming a developed economy," and appreciated the inclusion of its recommendations aimed at revenue enhancement and economic progress.