Monday, 4 July, 2022

Focus on job creation, private sector growth

► Tariff structure to be rationalised to protect local industries ► 6 slabs of customs duty to continue, 12 slabs of SD proposed

  • Special Correspondent
  • 10 June, 2022 12:00 AM
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Focus on job creation, private sector growth

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The government in FY 2022-23 budget has proposed a series of fiscal measures and supports to create employment by the growth of private sector. 

In his budget speech, Finance Minister AHM Mustafa Kamal stated that the budget for the upcoming fiscal year has been prepared with the twin motives.

He said this budget aims to reinvigorate the economy, which has been hard hit by the global pandemic and recent uncertainties in international trade, and bring dynamism in the economy and in revenue growth.

“Various steps have been taken to prepare for our LDC graduation, to create new employment, accelerate GDP growth, develop local industries, increase investment through protection and trade facilitation, pay special attention to export oriented and heavy industry development and continue ‘Made in Bangladesh’ slogan,” the finance minister said.

He said careful consideration has been given to the proposals received from various organisations, business associations and stakeholders to safeguard the interests of domestic industry, trade and consumers.

AHM Mustafa Kamal said several factors including economic recovery, investment and employment generation, export-import, FDI have been considered while making proposals about customs duty, regulatory duty, supplementary duty and value added tax at the import stage.

The budget targets to increase internal revenue collection (value added tax and income tax) through rationalisation of tariff structure for development and protection of local industries, he added.

The finance minister suggested to continue the existing six slabs of Customs Duty rates (0%, 1%, 5%, 10%, 15% and 25%), 3% regulatory duty on the products that have the highest import duty.

He also proposed 12 slabs of supplementary duty rates (10%, 20%, 30%, 45%, 60%, 100%, 150%, 200%, 250%, 300%, 350% and 500%) in the next fiscal year.

In addition, tariff rates on essential commodities, fertilisers, seeds, life-saving medicines and some other industrial raw materials are proposed to remain unchanged, Kamal said.

The minister asserted that the tariff of fuel, natural gas, fertiliser will increase despite the increase of subsidy.

At present, the share of income tax to the total tax revenue collected by the National Board of Revenue (NBR) stands at around 35 percent.  Despite the outbreak of COVID-19 pandemic, income tax recorded an average growth rate of 16 percent or above in recent years, and this growth is continuously maintaining an upward trend, the finance minister said.

“Considering 2013 as the base year, the growth recorded in tax base is 574 percent which is expected to improve even further through the policy initiatives proposed in this budget.”

Bangladesh has become a role model to the world, which is badly battered by COVID-19, for her success in addressing the damage to the economy caused by the pandemic and in promoting social and economic development, the minister said.

In the proposed budget, policy initiatives have been undertaken with a view to mitigating the damage to the economy caused by the post COVID-19 global unrest, as well as adopting business and investment friendly tax policy, ensuring proper enforcement of tax law, dissipating social and economic inequality and promoting ICT-friendly policy.

He the tax-free income ceiling has been kept unchanged at Tk 3 lakh in the following fiscal year.

While the present ratio of private investment to GDP in Bangladesh stands at 23 percent, the government has taken different initiatives to increase this ratio with a view to developing to the status of a developed country, the minister said.

“The desired target for private investment to GDP ratio can be achieved by reducing corporate tax rate,” he added.

Considering all these, and with a view to facilitating rapid expansion of trade and commerce, the corporate tax rate has been reduced from 32.5 percent to 30 percent through Finance Act 2021.

In FY2022-2023, the finance minister proposed a further reduction of the existing corporate tax rates.

In this case, all receipts and income must be transacted through bank transfer and all expense and investment over Tk 12 lakh must be made through bank transfer.

He also proposed to reduce the tax rate for non-listed companies from 30 percent to 27.5 percent.

To facilitate formalization of the economy and to incentivise formation of One Person Company (OPC), the minister proposed to reduce the tax rate for OPCs from 25 percent to 22.5 percent.

For the sake of development of the stock market and attracting investments, the budget also proposed a tax rate of 20 percent in place of existing 22.5 percent for listed companies that issue shares worth more than 10 percent of its paid up capital through Initial Public Offering (IPO).

But in this case, the tax rate would be 25 percent instead of 22.5 percent if the company fails to comply with the conditions mentioned earlier.

“Noteworthy that the existence of varied rates of tax at source on different types of supply causes excessive effective tax burden for business people in certain cases,” he pointed out.

With a view to mitigating this issue, he proposed to reduce the rate of tax at source on supply of trading goods from 7 percent to 5 percent, and on supply of books, except government supply, from 7 percent to 3 percent.

In order to reduce the cost of production in industries, the finance minister also proposed to cut the rate of tax at source on supply of raw materials to manufacturers from 7 percent to 4 percent.

He proposed investment tax rebate at 15 percent on eligible amount.

“The present government is relentlessly working to integrate the marginal and the underprivileged population of the country into mainstream economy,” the minister said.

Under the present provisions, an employer is allowed 5 percent rebate on payable tax if at least 10 percent of the total workforce is recruited from physically challenged population.

Also, tax rebate to the tune of 75 percent of the total salary paid to the workers from the people of third gender or 5 percent of the tax payable, whichever is less, is allowed to an employer employing 10 percent or more than 100 persons of the total workforce from the people of third gender.

The budget proposed to amend both the existing provisions to make it such that if any employer employs 10 percent or more than 25 persons from the physically challenged or the third gender community, the employer will be entitled to get 75 percent of the salary paid to these people or 5 percent of the tax payable, whichever is less, as tax rebate.

The finance minister proposed to add a new provision in the Income Tax Ordinance, 1984 so that the money earned and asset acquired abroad can be mainstreamed into the economy with a view to creating a flow of fresh fund and investment for economic activities.

According to the proposed provision, no authority, including the income tax authority, shall raise any question as to the source of any asset located abroad if a taxpayer pays tax on such asset.

“The proposed rate is 15 percent for immovable property not repatriated to Bangladesh, 10 percent for movable property not repatriated to Bangladesh and 7 percent for cash and cash equivalents repatriated to Bangladesh.”

The opportunity will be in force for the period starting from the July 1, 2022 and ending on June 30, 2023.

For the export oriented RMG sector, the prevailing tax rate stands at 12 percent for general factories and 10 percent for green factories.

With a view to encouraging diversification of export goods and ensuring a level playing field for all other sectors exporting goods and services, the budget proposed to introduce 12 percent tax rate for all other general industries exporting goods and services and 10 percent for all other green industries exporting goods and services.

This sort of export-friendly initiative will bring down trade deficit with other countries. “As a result, deficit in current account, a major economic indicator, will be minimised.”

The government has set a target to increase the number of information and communication technology (ICT)-based employment up to 30 lakh by 2025.

In his budget speech, Finance Minister AHM Mustafa Kamal said, “Direct or indirect employment has been generated for 20 lakh people having expertise in IT. Apart from this, at present around 6.5 lakh people are engaged in the profession of outsourcing as a free-lancer.”