Bangladesh needs to expand its tax network instead of overburdening the existing tax base, if the country wants to increase its revenue generation capacity, speakers opined at a seminar in the capital on Monday.
At the same time, the governance of the key institutions should be improved to enhance the ease of doing business and accelerate the country's economic growth, they said at a seminar on Finance Act 2017, held at a city hotel.
Leading chartered accountancy firm A Quasem & Co (AQC), which is a member of Ernst and Young (EY) in Bangladesh, organised the seminar to discuss the key issues of the new Finance Act, which has been approved in the parliament recently.
"In Bangladesh, tax rate still remains especially high for most of the companies, which is not really helpful for improving the ease of doing business," said Ms. Nihad Kabir, President of Metropolitan Chamber of Commerce & Industry, Dhaka (MCCI). She attended the programme as the chief guest.
"Although, the tax rate is 25 per cent for the publicly-traded companies, it ranges between 35 per cent and 45 per cent for other non-publicly traded companies as well as for the banks and financial institutions," she said.
She also noted that the feedbacks coming from the private sector regarding taxation should be better reflected in the country's national budget.
Speaking on the occasion, Editor of The Financial Express (FE) Mr. A. H. M. Moazzem Hossain called for improvement in governance of the key institutions that is needed for acceleration of growth.
"To be on the development highway, our GDP growth should be more than eight per cent. For achieving that growth, we need to improve the ease of doing business while reducing the business cost," Mr. Hossain said.
"This is where the question of governance comes; and governance is, above all, an institutional issue."
He also noted that the major regulatory agencies of the government should work beyond any political influence.
"When it comes to formulation of the budget, credible data are essential. To ensure the credibility of data, we need an independent statistical organisation," the FE Editor opined.
"No institution should work under any political influence, whether it is the National Board of Revenue (NBR), the Bangladesh Bureau of Statistics or the Bangladesh Bank. I think these institutions should be allowed to perform their roles in a proper functional way."
The FE Editor also called for widening the tax network instead of burdening the existing taxpayers.
"Currently, the focus of the NBR is on putting pressure on the existing taxpayers to pay more. However, much more emphasis should be laid on widening the tax network."
Noting that the implementation of the new VAT law has been deferred for two more years, he added that it is not clear how the resource gap will be met.
Senior Partner of AQC Mr. Sohel Kasem in his presentation showed that the basic corporate tax rate in Bangladesh is significantly higher than most of the countries across the world.
While the basic corporate tax rate in Bangladesh is 35 per cent, it is 17 per cent in Hong Kong and Singapore, 19 per cent in the UK, 24 per cent in Malaysia, 28 per cent in Sri Lanka, 30 per cent in India, and 31 per cent in Pakistan, he noted.
The speakers on the occasion also noted that the company tax rates have been largely unchanged in the latest national budget.
"While, corporate tax rate for the producers and exporters of ready-made garments (RMG) has been reduced to 12 per cent, the same has come down to 10 per cent for the RMGs having internationally-recognised certified green building factories," said Dinesh Agarwal, Partner of EY.
Highlighting the key changes brought about by the Finance Act 2017, Director of AQC Muhammad Abu Hanif Meah noted that the branch and liaison offices of the foreign companies are now permitted to maintain their income year in line with those of their parent companies.
Tax Day for the companies has been changed to the 15th day of the seventh month following the end of the income year, or the 15th day of September following the end of the income year where the said 15th day falls before the 15th day of September, he added.
Under the new act, if an employee, who is required to file a tax return, fails to do so on the Tax Day or fails to obtain a time extension, any salary paid to him/her will be disallowed in the hands of the company, the experts noted.
Besides, the act provisioned that there is no limit on overseas travelling expense for assessees engaged in providing any service to the government where overseas travelling is a key requirement of that service.
The act also mentioned that the deduction of tax at source under Section 52 would not be applicable to purchase of direct material that constitutes cost of sales or cost of goods sold.
Experts said payment to non-residents for digital marketing has been made subject to tax deducted at source (TDS) at 15 per cent, while submission of tax return has become mandatory for any person holding an executive or management position in a business or profession.
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