BUILD proposes flat 10% VAT rate

Business Initiative Leading Development (BUILD) – a private sector think tank – has proposed setting a flat value-added tax (VAT) rate at 10%, suggesting that it could help improve the government's revenue collection.

During a pre-budget meeting with the National Board of Revenue (NBR) today (5 March), Ferdous Ara Begum, chief executive officer of BUILD CEO, also highlighted the complexity of the current VAT structure. 

In addition to the universal 15% VAT rate, she said there are seven other rates – 1.5%, 2%, 2.4%, 4.5%, 5%, 7.5%, and 10% – bringing the total to eight different VAT rates.  

She noted that Section 46(1) of the VAT law does not allow VAT credit or rebates for rates below 15%, resulting in an effective VAT burden of around 30% due to the cascading effect.  

Currently, 53% of economic activities fall outside the VAT system, while the remaining 47% are subject to varying rates across three levels, rendering the rebate system largely ineffective, Ferdous Ara pointed out. 

This discourages taxpayers from joining the VAT network, she said at the programme held at the NBR office in Agargaon. 

At the meeting, NBR Chairman Abdur Rahman Khan said while the government also supports a single VAT rate, the exact percentage is still under discussion. 

He mentioned that efforts are underway to introduce a uniform rate in this budget or, if not, in the next one.  

Representatives from the Bangladesh Economic Zones Authority, the Bangladesh Export Processing Zones Authority, the Bangladesh Hi-Tech Park Authority, the Women Entrepreneurs Network for Development Association, and the American Chamber of Commerce in Bangladesh (AmCham) shared their perspectives at the meeting.  

After hearing all stakeholders, Khan emphasised the importance of policy continuity, assuring that no measures would be introduced that might hinder investment.  

AmCham submitted its budget recommendations for the fiscal year 2025-26 to the NBR chairman, emphasising tax reforms and business-friendly policies.  

The AmCham delegation was led by Syed Mohammad Kamal, country manager of MasterCard and a member of AmCham's Research and Policy Advocacy Subcommittee. 

Reza-Ur-Rahman Mahmud, managing director of Philip Morris Bangladesh, presented the details of the proposal.  
AmCham urged the withdrawal of the NBR's No Objection Certificate (NOC) requirement and sought clarification on the scope of tax waivers. 

Additionally, it proposed adjustments to withholding tax rates under Rule 5 of the WHT Rules 2023, to ensure fair deductions for contractors and subcontractors.  

AmCham recommended waiving the mandatory submission of income tax return slips for credit card issuance up to Tk5 lakh. It also proposed preferential tax rates for Offshore Banking Units (OBUs), aligning with other Asia-Pacific countries to attract investment.  

The Chamber called for the exclusion of TDS on imports under Section 120 and a reduction in exporter tax rates from 1% to 0.5% under Section 123. 

It suggested lowering the minimum tax rate on carbonated beverages to 0.6% and reducing the supplementary duty from 30% to 15%.  

Additionally, AmCham proposed VAT exemptions for recycled cotton fibre and its raw materials to support sustainable industries. 

It also urged formal recognition of critical healthcare-related sectors with a reduced VAT rate.