DCCI for capping highest tax rate at 25%, NBR says no

HIGHLIGHTS

• DCCI proposes raising tax-free income limit to Tk5 lakh
• Wants introductions of a single VAT rate
• NBR says government open to unified VAT
• Paint manufacturers, cold storage and agro processors seek tax relief

The Dhaka Chamber of Commerce and Industry (DCCI) has proposed lowering the highest tax rate from 30% to 25% in the upcoming budget, citing rising inflation but was met with opposition from the National Board of Revenue (NBR). 

The NBR believes that the rate should instead be increased as developed countries have a much higher tax rate which helps in reducing inequality. 

Responding to another proposal, the NBR stated that it supports a single or unified VAT rate, even at a reduced rate, provided that all businesses reach a consensus.

The proposals were brought forth by DCCI President Taskeen Ahmed during a pre-budget discussion at the NBR headquarters in the capital's Agargaon today (18 March). NBR Chairman Abdur Rahman Khan chaired the event.

The DCCI president presented a total of 42 budget recommendations, including expanding the tax net and setting revenue collection targets, reducing tax rates, implementing business-friendly tax policies, introducing automation systems, reforming the VAT system, protecting local industries and production sectors, simplifying import duties and tariffs, and simplifying the individual income tax structure.

At the discussion, Taskeen said, "Currently, the annual tax-free income limit for individuals is Tk3.5 lakh and the maximum tax rate is 30%. We are proposing to raise the tax-free income limit to Tk5 lakh and reduce the highest tax rate to 25%."

He said that the DCCI made this proposal considering rising inflation and the increasing cost of living, suggesting that the tax-free income threshold should be adjusted accordingly.

The DCCI also proposed a revised tax structure, suggesting that the next tax slab, after the tax-free income of Tk5 lakh, should have a 5% tax rate on the next Tk3 lakh income.

Currently, a 5% tax is imposed on income exceeding Tk1 lakh after the Tk3.5 lakh tax-free limit.

To this, the NBR Chairman Abdur Rahman Khan said, "In developed countries, income tax rates at the individual level are 50-55%. Reducing it further would not be right. 

"Instead, it should be increased. Otherwise, inequality will not decrease."

"Higher personal taxes ensure reduced inequality in developed countries because people receive better services in return. We [the government] must also ensure quality services. Only then will people feel comfortable with less money in hand," he added.

Push for simplified VAT rate

Presenting another proposal, Taskeen said, "Currently, the standard VAT rate is 15%, but in various sectors, it has been reduced to 10%, 7.5%, and 5%. This multiple rate structure creates complexities for businesses, hampers tax administration efficiency, and often leads to disputes."

Besides, inconsistent VAT rebate benefits impose extra tax burdens on many businesses, he added.

"Introducing a single 10% VAT rate and a 1% rate for informal businesses would simplify tax collection, reduce disputes, and ultimately increase revenue generation," Taskeen said.

In response, the NBR chairman indicated that the government is open to a single VAT rate, provided businesses demonstrate transparency and willingness to comply.

He said the unified VAT rate could not be implemented earlier due to strong resistance from businesses. "Now, they are the ones facing the consequences. If all parties agree, we should move towards a unified VAT rate, even if it is slightly reduced.

"A proposal can be submitted through FBCCI. If needed, we will even develop software for businesses to make it easier. Most of the disputes arise because of the multiple VAT rates," he added.

Expanding the tax net

Citing NBR data, Taskeen highlighted that although Bangladesh has over 11.3 million TIN (tax identification number) holders, only 3.7 million filed tax returns between 1 July 2024 and 6 February 2025. Of these, only 1.33 million submitted returns online.

He urged NBR to set short, medium, and long-term targets to increase the number of taxpayers and expand the tax net. He also emphasised the need to implement an automated tax return system to make it easier for corporate entities to file tax returns online.

NBR Chairman Abdur Rahman Khan acknowledged the low return submission rate despite an increase in TIN holders over the past decade. He emphasised that simplifying corporate tax processes and lowering corporate tax rates could encourage more proprietorship businesses to formalise as corporate entities.

Meanwhile, several industry associations have also submitted tax relief proposals to ease financial burdens on their respective sectors.

Bangladesh Paint Manufacturers Association has requested the removal of the 10% Supplementary Duty (SD) on paints and paint-related products, considering them essential goods.

Bangladesh Cold Storage Association has proposed a reduction in advance income tax (AIT) to 1% on potato purchases and the withdrawal of VAT and AIT on the procurement of cold storage equipment.

Bangladesh Agro Processors Association (BAPA) has sought exemption from tax deduction at source on the supply of agricultural products and has also proposed a uniform 5% tariff on the import of industrial raw materials.