Govt to introduce first-ever prospective tax rates

For the first time in the country, the government plans to announce prospective tax rates for at least two fiscal years in the upcoming budget, aiming to attract foreign direct investment (FDI), according to finance ministry officials.

Also, high-net-worth individuals will face a tax increase of 30% from the current 25%, a move intended to reduce income inequality, fund public services, and ensure a fairer distribution of resources.

They said the country will enter a "predictable tax regime" by the next fiscal year, which will help boost FDI, as every foreign investor wants to know its tax predictability.

Besides, it will be helpful for local individuals and companies to plan their finances as they will be able to know what their tax rates will be in the coming years.

According to NBR officials, the country currently follows a "retrospective tax regime," where taxpayers always remain uncertain about their tax rates or burden. Almost every developed country follows a prospective tax regime.

Snehasish Barua, a partner of Snehasish Mahmud and Co, a leading chartered accountants firm, told TBS, "We have been demanding the introduction of a prospective tax structure for a long time. It will help everyone to make their tax and investment plans."

He added, "Currently, taxpayers are in the dark about their total tax amount. In some cases, they have to borrow money at the end of the year to pay their taxes."

No gap between listed and non-listed firms

The new budget also plans to bring some changes to corporate tax rates, offering a 2.5% corporate tax cut for companies that adopt cashless operations to promote a cashless society.

Through this move, noncompliant listed firms and compliant non-listed firms will face the same tax rate from the next fiscal year.

Business leaders have been demanding to widen the tax gap between listed and non-listed firms; otherwise, companies may not be interested in going public.

This week, in a press conference, DSE Chairman Professor Dr Hafiz Md Hasan Babu said that the difference in the corporate tax rate between listed and unlisted companies should be at least 10%-12.5%.

Currently, the tax rate difference is 7.5%, and according to NBR sources, this tax rate may be further reduced conditionally in the next budget.

Dr Babu said, "A larger tax gap is essential to incentivise good companies to get listed."

Deadline for expiration of SROs

As part of the prospective tax regime, the NBR is expected to introduce a specific time frame for Statutory Regulatory Orders (SROs) concerning the import of goods and raw materials.

Among these, concessional duty facilities for importing paper are set to expire on 30 June 2027. Additionally, the same facilities for importing raw materials for computer and lift manufacturing will expire during the same time frame.

On 30 June 2026, raw materials such as prefabricated building materials, refrigerators, washing machines, LPG cylinders, auto tanks, valves, and coal for electricity generation will face expiration of concessional duty facilities.