Minimum turnover tax on beverages, sugary products likely to fall to 2.5%

The minimum tax on turnover for food and beverage products containing added sugar may be reduced by 0.5 percentage points, from 3% to 2.5%, in the upcoming budget, according to officials involved in budget preparation at the National Board of Revenue (NBR).

Officials said businesses have long argued that the existing minimum tax is high compared to their profit margins. The proposed cut is aimed at making the rate more reasonable.

Beverage and sugary product makers welcomed the move but said the rate should be reduced further.

Health experts, however, opposed any tax cut on sugary products, saying higher taxes are needed to discourage consumption and protect public health.

The government began increasing the minimum turnover tax on such products from FY2023-24. In FY2024-25, the rate was raised to 5% but later reduced to 3.5% following industry concerns. In the FY2025-26 budget, it was further reduced to 3%.

Minimum tax on turnover means companies must pay a fixed tax on sales regardless of profit or loss, increasing the effective tax burden on low-margin businesses.

Currently, the corporate tax rate for non-listed companies is 27.5%. However, in a letter sent to the finance minister, beverage sector entrepreneurs said the overall tax incidence had risen to between 43% and 54% because of the minimum tax.

"The high tax rate is hurting affordability, business growth, investment confidence and has already forced us to defer investments," said Shadab Ahmed Khan, managing director of Coca-Cola CCI Bangladesh.

According to industry sources, the market size of carbonated soft drinks declined from Tk6,704 crore in FY2022-23 to Tk5,201 crore in FY2024-25.

At a pre-budget meeting with NBR officials in April, health economist and Dhaka University Professor Rumana Huque proposed bringing more sugary food items under the tax net and increasing supplementary duty on such products.

She also proposed imposing a 1% health development surcharge on all sugary drinks, similar to the surcharge currently imposed on tobacco products.

"Taxes on sugary products should not be reduced in the interest of public health. Rather, sugary products that are currently outside the tax net should be brought under taxation. That would also increase government revenue," she told TBS yesterday.

She said excessive consumption of sugary products was contributing to rising diabetes, hypertension and obesity among young people in Bangladesh.

"The government must consider public health alongside revenue collection," she added.

A September 2022 study titled "Underweight, overweight or obesity, diabetes, and hypertension in Bangladesh, 2004 to 2018" found that obesity among women nearly tripled over 14 years, while it increased 1.5 times among men. Diabetes prevalence also rose from 11% to 14% among both men and women.

NBR plans automatic tax refunds

The National Board of Revenue (NBR) is also planning to introduce an automatic tax refund system for most taxpayers in the upcoming budget, according to officials familiar with the matter.

Under the proposed system, if a taxpayer becomes eligible for a refund after submitting a tax return, the amount will be automatically credited to their bank account within three to four months without requiring any application.

A senior NBR official, speaking to TBS on condition of anonymity, said companies and individual taxpayers would be covered under the system, except for a few cases.

"If a refund is created for any taxpayer, the NBR will credit the amount to their account within three to four months," the official said.

He said the processing time could be reduced further in future once the system becomes fully operational.

The official also said taxpayers would no longer need to apply separately for refunds, as the NBR would verify eligibility and automatically transfer the amount.

According to the official, the government currently collects around Tk1.50 lakh crore in income tax annually, while total refunds amount to around Tk2,000 crore to Tk3,000 crore each year.

Taxpayers in Bangladesh have long complained about delays and difficulties in receiving tax refunds.