Board has limited option to offset revenue loss
The revenue board plans to backtrack from a move to slash the corporate tax in the upcoming budget as the revenue to be forgone under the fiscal stimulus stands high, and loss offsetting budgetary measures appear limited. Senior taxmen said raising the tax slabs for individuals to offset the losses to be incurred for slashing corporate tax would be practically impossible under a democratic system of government as such measures could trigger backlash from different quarters.
Highlighting the other options, they said scrapping the existing tax holiday and tax concessions available to some selected sectors, start ups and industries in backward regions could minimize the revenue loss under reduced tax slabs for corporations.
The option, however, ‘Could turn out to be sour given the current slowing economy and slumping investment climate,’ a member of the National Board of Revenue told New Age, who stands firm not to scrap the existing tax facilities for industrial sector in the budget to be unveiled next month.
He said the next budget will expand the tax net, may increase the tax at source and impose some sort of property taxes to achieve the growth target in the income tax, which may hover between 30 and 35 per cent over the revised target.
Finance Minister AMA Muhith and NBR chairman Md Ghulam Hossain on a number of occasions vowed to slash the corporate tax to boost the investment in the formal economy.
The CPD on Sunday opposed the move and said the corporate tax of the country is the lowest in the South Asia region.
Currently, the highest corporate tax is 45 per cent imposed on non-listed mobile and cigarette companies, which is five per cent lower for the listed ones of similar categories.
The tax payable by banks and insurance companies is 42.5 per cent, publicly traded other entities at 27.5 per cent and non-publicly traded companies at the rate of 37.5 per cent.
The NBR officials said around 60 per cent earnings generated from income tax come from corporate tax, while the rest from individuals and private companies.
The income from the corporate sector in last 2012-2013 fiscal year was around at Tk 27,000 crore. Of the total, above 35 per cent was generated
from banks and financial institutions including leasing and insurance
companies, according to estimates of the revenue board.
The tax officials said if corporate tax is reduced as per the demand of business community, the government has to incur between Tk 6,000 crore and Tk 7,000 crore in a single financial year.
‘We have no potential options to offset the huge tax income,’ a senior NBR official said.
The high officials at the NBR said they had backtracked from their earlier stand on corporate tax and would pursue the finance minister not to go for any changes on tax rates in the budget.
‘We will meet him (the finance minister) soon to have his final word to fix the taxation policy for next budget. If the tax slabs for corporations are reduced in the budget, ambitious target already set for NBR and income tax for next fiscal year will be impossible to achieve,’ a member of the NBR told New Age on Tuesday.
Meanwhile, the finance ministry officials said the issue to lower the tax rate and rationalise the existing tax breaks are of the IMF’s as the lender under the extended credit facility programme tagged the fiscal measure as a major pre-condition to get the ECF fund.
‘It now depends on the finance minister —even the issue might be discussed with Prime Minister Sheikh Hasina to have a final direction
ahead of the national budget,’ the finance official said.
-With New Age input
