Why are businesses opposing minimum tax system?
Business leaders and tax experts say the proposed reform could ease a major burden on firms struggling with rising costs and weak profitability.
Businesses in Bangladesh have long opposed the country's minimum tax system, arguing that it forces companies to pay taxes even when they are making losses or earning low profits.
The issue has resurfaced as the government considers introducing a refund mechanism for excess minimum tax paid by companies in the upcoming budget.
Business leaders and tax experts say the proposed reform could ease a major burden on firms struggling with rising costs and weak profitability.
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Under the existing system, companies are required to pay minimum tax based on turnover or gross receipts, regardless of whether they make a profit or incur losses.
For example, if a company pays Tk1 crore in minimum tax at a 2% turnover tax rate, but its final profit-based tax liability is only Tk70 lakh, the excess Tk30 lakh is not refunded under the existing system. As a result, the company's effective tax burden rises above the statutory corporate tax rate.
The problem becomes more severe for companies incurring losses, as they are still required to pay minimum tax despite having no taxable income.
Mobile phone operator Robi Axiata said it has paid around Tk1,000 crore more in minimum tax than its actual tax liability over the years.
Although the company has recently returned to stronger profitability, allowing it to offset excess taxes, Banglalink continues to face losses while remaining subject to minimum tax obligations.
The issue has repeatedly been raised by business organisations, including the Foreign Investors' Chamber of Commerce and Industry and the Metropolitan Chamber of Commerce and Industry.
Shahed Alam, chief corporate and regulatory officer of Robi Axiata, said turnover tax remains a major obstacle to business growth.
He said the turnover tax imposes tax on gross revenue without considering whether a company is profitable or loss-making, making the system inconsistent with the principles of fair taxation.
Taimur Rahman, chief corporate and regulatory affairs officer of Banglalink, said the company has paid around Tk938.9 crore under the minimum tax regime between FY2015 and FY2024 despite having no taxable profits.
He said the system had significantly affected the company's cash flow and investment capacity.
