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Corporate Tax Cut In Bangladesh Budget

by Lorys Charalambous,, Cyprus

11 June 2014

Bangladesh has outlined plans to slash the corporate tax rate and increase the tax burden on affluent taxpayers in its 2014/15 Budget.

The corporate tax rate for non-listed companies is proposed to be lowered from 37.5 percent to 35 percent. It also proposed to reduce the minimum turnover tax rate from 0.5 percent to 0.3 percent. A reduction in the tax rate from 37.5 percent to 25 percent is planned for autonomous bodies (organizations).

The Budget proposes to increase the income tax rate from 25 percent to 30 percent for high income taxpayers having an annual income of more than BDT4.42m (USD570,000). It also proposes to increase the tax exempt income threshold for certain categories of taxpayers: for women and senior citizens aged over 65 years from BDT250,000 to BDT275,000; from BDT300,000 to BDT350,000 for disabled persons; and to BDT400,000 for war-wounded freedom fighters.

In the property sector, Finance Minister Muhith's Budget proposes greater transparency in the process of house rent collection, and the transition to a a floor-size based advance tax on property instead of a value-based regime in affluent areas.

With a view to creating an investor-friendly environment for industry, for new industrial entrepreneurs, the Budget proposes to extend existing tax holidays from June 2015 to June 2019, and proposes to reinstate an alternative accelerated depreciation incentive.

As part of its environment tax plan, the Budget proposes to impose a one percent environment protection surcharge or green tax on an ad valorem basis on all kinds of products manufactured in Bangladesh by polluting industries.

The tax exemption limit for the agriculture sector is proposed to be increased from BDT50,000 to BDT200,000.

To encourage the export sector, taxes at source on exporters are proposed to be reduced across the board until at least June 30, 2015. The Government plans to introduce modern customs management techniques and tools from the very beginning of 2014-15 to prevent mis-declaration, under and over invoicing, and money laundering.

The supplementary duty (SD) rates on 40 basic raw materials will fall from either 10 or 25 percent to 5 percent. The customs duties on 14 items used in the manufacture of anti-cancer drugs and medicines are proposed to be fully exempted. Certain medical equipment will receive import duty exemptions.

Customs duties of 10 and 25 percent on the raw materials used in domestic paper, glass and ceramics, rubber, furniture, paint, electrical, plastic industries will be lowered to five and ten percent, respectively. Navigation lights, broadcasting equipment, and fire extinguishers will face a five percent rate. Likewise, the textile sector will benefit from a reduction in the cost of a few raw materials used as inputs to five percent.

Lastly, a one percent health development surcharge will be levied on all imported and domestically produced tobacco products.

In his budget speech, Muhith discussed at the outset some of the steps taken so far to transform the National Board of Revenue (NBR) into a modern service-oriented organization. These steps have included simplification of income tax return forms; the introduction of an e-payment and e-filing system; the opening of taxpayers' information and service centers; and setting up of a transfer pricing cell to prevent tax evasion, among other things.

Further administrative measures are included in the Budget, including a change to existing rules concerning the selection of tax/VAT returns for audit.

TAGS: capital gains tax (CGT) | environment | compliance | Finance | tax | investment | business | value added tax (VAT) | fiscal policy | banking | entrepreneurs | budget | corporation tax | audit | tax thresholds | legislation | Bangladesh | import duty | tax reform | construction | individual income tax | services

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