The government is going to introduce a 12% corporate tax for all export sectors – the same rate as the readymade garment industry is now enjoying – with a view to encouraging export diversification, according to finance ministry sources.
Besides, green industries exporting goods and services will be taxed at 10%. All sectors other than the RMG now pay a 30% tax for exports of goods and services.
The massive cut in corporate tax will ensure a level-playing field for all other sectors. This type of export-friendly initiative will lower the trade deficit with other countries, according to sources at the finance ministry.
The deficit in the balance of payment in foreign currency will be minimised as well, they noted.
The prevailing tax rate for export-oriented RMG factories stands at 12% and it is 10% for green ones.
The reduced rates will not be applicable for transport service, mobile telecommunication service and internet and internet-based services, said the ministry officials.
Welcoming this move, Shamim Ahmed, president at Bangladesh Plastic Goods Manufacturers and Exporters Association, told The Business Standard, "This will play a big role in boosting local and foreign investments."
Moazzem Hossain Moti, president of Garments Accessories and Packaging Manufacturers and Exporters Association, said the RMG sector also gets extra facilities while availing customs-related services. If a level-playing field is ensured here too it will help non-RMG sectors go for more diversification.
Dr Ahsan H Mansur, executive director at Policy Research Institute, said it is a very important decision to promote other industries and maintain equality with the export-oriented garment sector.
This move will also be helpful for reducing the trade deficit to some extent, he also said.
The economist suggested that the government provide duty-free access to raw materials for all exporters under a central bonded warehouse, he noted.
Welcoming the government move, Abul Kashem khan, a trustee of Business Initiative Leading Development, said it will be a groundbreaking step to diversify the export basket.
"Providing the same facility for all export sectors is our long-time demand, which will help them grow equally," he added.
The government should consider the common bonded warehouse facility for all exporters, Abul Kashem, a former president of DCCI, also said.
10% source tax for Internet services coming
The government is going to deduct a 10% tax at source on Internet services. Besides, the source tax on bandwidth payments made to foreign companies with no establishments in Bangladesh will be slashed to 10% from the existing 20%, according to finance ministry sources.
There may also be a proposal in the next budget to consider the adjustable 5% tax collected from imports of beverage concentrate, exports of services, operations of inland ships and commercial vehicles as a minimum tax.
At present, Children getting any gifts in the form of money, land and other properties from their parents are exempted from taxation.
But tax is imposed on the gifts received by parents from their children. There will not be such taxation in the next fiscal year.
No scope to invest black money in stocks
The opportunity to whiten undisclosed money by investing in the capital market will go in the next fiscal year, with no expected response from untaxed money holders in the current fiscal year.
In the current fiscal year, the untaxed money can be invested in the stock market, subject to paying 25% tax plus a 10% penalty on the payable tax.
The government is also going to withdraw the opportunity to legalise undisclosed property, such as flats, bank deposits and savings instruments on similar conditions.
Source tax on new services
The new budget will also propose imposing a 5% source tax on rental value of waterbodies, which are not government property.
At the same time, Internet service providers also will face a 10% source tax while receiving their payments.
Finance ministry officials said the source tax will be revised to make it simple as the current rates for a service is divided based on the amount that does not exceed Tk25 lakh - if the amount is more the rate is higher.
According to the new budget proposals, source tax on advisory or consultancy service, professional service, credit rating services, technical services and technical assistance fees will be deducted at a rate of 10% instead of the existing 12%.
At the same time, catering service, cleaning service, collection and recovery service, private security service, manpower supply service, creative media service, public relations service, event management service, training, workshop, organisation and management service, courier service packing and shifting service will be taxed at the same rate.
Finance ministry officials believe that if all such proposals get approval, economic activities in Bangladesh will continue to be vibrant, inflow of foreign remittance will increase with growth in the export sector, tax net and formal economy will expand, new entrepreneurs will grow and employment will generate, foreign investment will increase and business friendly environment will be ensured.