Corporate tax may decrease further

Finance minister AHM Mustafa Kamal has proposed a further cut in corporate tax by 2.50 percentage points.

The finance minister made the proposal in his budget speech in parliament on Thursday afternoon.

“With a view to facilitating rapid expansion of trade and commerce, the corporate tax rate has been reduced from 32.5 per cent to 30 per cent through Finance Act 2021. In FY2022-2023, I would like to propose a further reduction of the existing corporate tax rates," he added.

Mustafa Kamal said in this case, all receipts and income must be transacted through bank transfer and all expense and investment over Tk 1200,000 must be made through bank transfer.

“Here, I propose to reduce the tax rate for non-listed company from 30 per cent to 27.5 per cent,” he added.

The finance minister in his budget speech also said tax rate on bank, insurance, financial institutions, tobacco companies, mobile phone operators and other corporate companies remains unchanged. Business have long been demanding reduction in corporate tax.

Besides, to facilitate formalization of the economy and to incentivize formation of One Person Company (OPC), the minister also propose to reduce the tax rate for OPCs from 25 per cent to 22.5 per cent, he added.

Mustafa Kamal said, “For the sake of development of the stock market and attracting investments, I propose a tax rate of 20 per cent in place of existing 22.5 per cent for listed companies that issue shares worth more than 10 per cent of its paid up capital through Initial Public Offering (IPO). I, however, propose the tax rate to be 22.5 per cent for a listed company that issues shares worth 10 per cent or less than 10 per cent of its paid up capital through IPO. But in this case, the tax rate would be 25 per cent instead of 22.5 per cent if the company fails to comply with the conditions mentioned earlier."

There has been good news for exporting companies.

The finance minister said, “Export is the main source of foreign currency for the country. Export business plays a vital role in achieving economic prosperity. In order to increase the contributions of the export sector to our GDP, long-term tax incentive have been granted to goods ‘Made in Bangladesh’ and services in the last fiscal year. As a continuation of that effort, initiatives should be taken to create new export sectors, to diversify goods and to search for new export markets so that ‘Made in Bangladesh’ can be made a global brand.”

“Also, service export should be given due priority alongside goods export. As a part of this initiative, I propose to include export of services in the definition of export in tax statute. I also propose to exempt the income earned in foreign exchange by ocean going vessels carrying Bangladeshi flag from paying tax until 2030 provided the income is brought to Bangladesh through banking channel. By adopting these proposals, we will be able to establish service export as a potential export industry for earning foreign currency for the country,” he added.

The minister said, “The prevailing tax rate for the export oriented RMG sector stands at 12 per cent for general factories and 10 per cent 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, I propose to introduce 12 per cent tax rate for all other general industries exporting goods and services and 10 per cent for all other green industries exporting goods and services.” the

“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 minimized,” Mustafa Kamal assured.