Taskforce suggests cutting trade tax to one-quarter by 2035

The National Taskforce for Tax Reforms has proposed a gradual reduction of Bangladesh's trade tax rate to one-quarter of its current level over the next decade, citing excessive reliance on import duties and structural distortions in the tax system.

At a press briefing, "Tax Policy for Development: A Reform Agenda for Restructuring the Tax System," at the Policy Research Institute (PRI) office in Dhaka today (29 January), taskforce Chairman Dr Zaidi Sattar said Bangladesh's average import tax rate, currently around 28%, is among the highest globally. 

He said the rate should be reduced to 15% by 2030 and further to 7.5% by 2035 to align the tax structure with development priorities.

The taskforce has already submitted its report to the Chief Adviser, though the full document has yet to be made public.

Zaidi noted that trade tax revenue currently accounts for about 2.5% of Gross Domestic Product, which the taskforce recommends bringing down to 1% over time.

He also pointed to widespread distortions across value-added tax, income tax, and import tax regimes, calling for comprehensive reforms.

The key recommendations include introducing a single VAT rate and abolishing the minimum tax system, which the taskforce said discourages voluntary compliance and distorts business incentives.

The taskforce members, at the press briefing, highlighted major challenges identified in the report, including a narrow tax base, heavy dependence on manual tax administration, and an imbalanced tax structure.

Tax reform report submitted: What it means for revenue and growth

The report contains 55 recommendations aimed at fostering a long-term culture of tax compliance, they said.

Currently, direct taxes contribute about 30% of the National Board of Revenue's total revenue, while the remaining 70% comes from indirect taxes, mainly VAT and import duties. 

The taskforce has proposed increasing the share of direct taxes to 50% within the next 10 years by gradually reducing dependence on trade taxes.

Proposal to tax gifts and reform property transfers

Taskforce member Snehasish Barua said the report recommends modernising property transfer taxes through updated valuation methods. It also proposes cutting existing property transfer taxes, covering land and apartments, by half.

Besides, the taskforce has suggested imposing a 1% tax on gifts and introducing an inheritance tax.

The taskforce chairman said the recommendations do not focus on raising tax rates but instead emphasise lowering rates in selected areas to improve compliance. The report also proposes reducing the corporate tax rate to 20% for listed companies with no non-performing loans and a minimum equity holding of 35%.

To bring the shadow economy into the formal system, the taskforce has recommended implementing the National Data Connection Centre, promoting a cashless economy, and introducing a unified identification number for VAT, income tax and import tax.