Tax exemptions to continue, tax net to be expanded

The upcoming fiscal year's budget includes numerous tax exemptions. Alongside the expansion of the creative economy, entrepreneurs in various sectors are being granted tax and duty concessions. The budget will also focus on expanding the tax base by offering tax relaxations.

However, Finance Minister Amir Khasru Mahmud Chowdhury is also making tough decisions, such as imposing tax obligations on taxpayers and entrepreneurs or bringing them under the tax net. For instance, having a Tax Identification Number (TIN) will be mandatory to open a bank account, and retail sellers may face source tax when purchasing goods. This could increase the tax burden on ordinary taxpayers and small businesses. The finance minister is particularly focused on expanding the tax net this time.

To expand the creative economy, tax exemptions are being provided on music and various cinema-related items. There are also initiatives in the budget related to pharmaceuticals and medical supplies. The tax-free income limit is being increased in line with the promise made.

In this regard, Dhaka Chamber of Commerce & Industry (DCCI) President Taskin Ahmed told Prothom Alo that the government aims to build a trillion-dollar economy and create employment for 10 million people.

He welcomed the announced concessions for business and commerce, saying these would expand business activities.

Taskin Ahmed added that the revenue collection target for the next fiscal year is set to increase by around 30 per cent. The focus should be on expanding the tax base rather than putting additional pressure on existing taxpayers.

One of the key decisions in this year's budget is the requirement for a TIN to open a bank account. Any individual will have to show a TIN certificate when opening an account, according to the announcement that might come. If this proposal is made, one must obtain a TIN certificate before opening a bank account.

However, there may be some exemptions. For instance, students won't need to provide a TIN certificate when opening bank accounts. Also, no-frills accounts, such as 10-taka bank accounts or accounts for receiving government aid and pension benefits, might be exempted from showing a TIN.

There are over 17 million bank accounts in the country. The government is aiming to expand the tax net through this initiative. Additionally, the tax-free income threshold for individual taxpayers is being set at Tk 375,000 as per last year's budget announcement. The corporate tax rate remains unchanged.

The limit for excise duty on bank deposits is being increased from Tk 300,000 to Tk 400,000. However, excise duty will be imposed on loan amounts once.

The burden of tax could fall on the country's millions of retail traders. The new proposal suggests imposing a 0. 2 per cent upfront tax on the supply of goods to retail sellers. Two takas per 1,000 taka will be deducted as upfront tax. It has been learned that when purchasing goods, the suppliers or distributors will cut this upfront tax and deposit it to the government's treasury.

According to the Bangladesh Shop Owners Association, there are approximately 7 million retail sellers in the country.

In this period of high inflation, tax exemptions might be provided to keep the prices of essential goods, including rice, lentils, oil, and sugar, affordable. A source tax of 1 to 5 per cent exists on 60 essentials, which may be reduced to 0. 5 per cent.

The list of these goods includes paddy, rice, wheat, potatoes, livestock, fish, onions, garlic, ginger, salt, sugar, edible oil, and so on.

The new government wishes to develop a global-standard "creative economy" by leveraging the talents of the promising young generation. Proposals are being made to reduce the duties and taxes on certain products to make high-quality content and film-making materials more accessible to the youth.

In digital media, the existing 5 per cent regulatory duty on importing guitars, pianos, violins, and so on, and necessary parts for developing the quality of music and creating creative music may be withdrawn. To elevate the technical aspects of film and creative media to an international level, the import duty on high-tech cinematographic cameras and spare parts for cinematographic cameras and projectors might be reduced from 15 per cent to 5 per cent.

Cardiac treatment costs could decline. For instance, a 10 per cent withdrawal at the supplier level for heart rings might be expected, potentially reducing costs by up to Tk 20,000 per ring.

The finance minister may declare a 10 per cent VAT withdrawal at the supplier level on intraocular lenses, potentially reducing their price by up to Tk 5,000 per set.

The 15 per cent VAT and 5 per cent upfront tax on the import of dialysis filters could be removed for patients with kidney issues, potentially saving patients up to Tk 800 per dialysis treatment.

The existing advance duty on hem dialysis blood tubing set imports for kidney patients of 7. 5 per cent VAT might be withdrawn. For physically special-needs individuals, the upfront income for importing 15 specific products may be reduced from 2 per cent to 1 per cent.

Moreover, the mortality import duty could be reduced from 25 per cent to 1 per cent for mortuaries used for preserving the deceased.

Additionally, there are encouraging news for pharmaceutical industry entrepreneurs. The budget includes initiatives to enhance the capability of the domestic pharmaceutical industry to produce international-standard and affordable cancer-preventing drugs. Nine more items might be added to the existing list with concessional duty for importing raw materials for the pharmaceutical industry.

Import duty on 51 new raw materials for producing Active Pharmaceutical Ingredients (API) is being completely removed.

Furthermore, 17 more basic raw materials are being added to the existing concessions to sustain pharmaceutical export growth.

For the sale and purchase of gold and gold jewelry, the existing 5 per cent value-added tax (VAT) on the total sales value is being waived and set at Tk 2,500 per bhori (a traditional unit of weight for gold). Due to the increase in gold prices, this VAT is being reduced, likely lowering the cost of buying gold jewelry. In addition, the source tax on gold supply might be reduced from 5 per cent to 0. 5 per cent.

There is a proposal in the budget to reduce the overall duties and taxes on the import of electric vehicles (EV). The current duty-tax burden on EVs is 93 per cent. In the new proposal, the finance minister may suggest a 64 per cent duty-tax rate for EVs priced up to $25, 000, and 80 per cent for EVs priced between $25, 000 and $50, 000.

The advance tax of Tk 200,000 currently deducted on electric vehicle registration and fitness renewal will be reduced based on kilowatts: Tk 25,000 for 200 kW, Tk 50,000 for 300 kW, Tk 75,000 for 400 kW, and Tk 100,000 for over 400 kW electric vehicles.

The declaration to sustain all concessional privileges for the import of components and raw materials of the electric bus and truck manufacturing industry until 30 June 2031, will be announced.

Additionally, the duty-tax-free benefit for importing electric buses used for students will be maintained until 30 June 2030.

All types of duties and taxes might also be withdrawn for importing electric car chargers and charging stations.

Special tax exemptions are being introduced for social media content creators. Many people have taken up content creation on social media as a profession. The existing 15 per cent VAT imposed on the services provided by content creators and freelancers is being withdrawn.

Additionally, the tax exemption benefits for startups, innovation ventures, and tech-based companies will be continued. There might be a complete exemption of the 15 per cent VAT at the local level for startup companies.

There will be a declaration of exemption from the 15 per cent VAT on service imports by startup companies and for rental spaces and installations by startup companies.