The government should set up a high-level committee to provide tax benefits for businesses and to take necessary measures to make the tax system friendlier, simpler, and more transparent, experts said at a webinar on Saturday.
Speaking at a virtual members' conference on "Policy Paper on Direct and Indirect Tax" organised by the Institute of Chartered Accountants of Bangladesh (ICAB), they also suggested automation of all tax-related activities.
The experts suggested that the National Board of Revenue (NBR) should reduce the Tax Deduction System (TDS) as per global practice, fix minimum tax rate for an individual at 25%, impose tax at the rate of 20% to attract one-person companies and offer activity incentives for Bangladeshi products producers.
They also stressed giving concentration on thrust sectors like leather, jute, and garment fashion design to create a country brand in the international market.
Speaking at the webinar, ICAB President Mahmudul Hasan Khusu FCA said tax rate changes have a significant impact on investment decisions and investors get benefits to prepare a budget and plan accordingly based on the tax rate.
He suggested that NBR should carry out research and take a strategic decision about allowing the exemption to increase government revenue from the private sector.
"The discussion helps NBR find out the areas of leakage, eliminate the areas of harassment of taxpayers and bring all taxpayers under online systems," added MH Khasru.
The ICAB president said taxation is indispensable in order to support the basic function of a sustainable state and to create the context for economic growth.
"An improved tax system is a key to financing public services, reducing inequality, and making the government more accountable," he said. "Unfortunately, our tax rate is higher compared to similar economies including the neighbouring countries."
Mohammad Al Maruf Khan, a partner in Howladar Yunus & Co, and Snehasish Barua, a partner in Snehasish Mahmud & Co, jointly presented the keynote paper at the webinar.
Pointing out the tax on foreign nationals working in Bangladesh, Snehasish Barua suggested introducing provisions like withdrawals of tax and customs benefits, cash incentives, and cancellations of branches' permission for unauthorised employment.
He added that a mandatory declaration from employers should be included in the tax returns. In order to attract investment in specific sectors and boost exports, the government may offer a capital expenditures (Capex) subsidy of 20-25% of total project cost for those companies meeting the criteria.
The keynote-paper focused on general design issues on how to make the tax system in Bangladesh more growth-friendly, simple and transparent and fairer.
It also focused on widening the tax net for revenue generation with an aim to achieve a higher tax-GDP ratio, increasing private sector investment, employment generation, and export diversification to attract more foreign direct investment (FDI) in the country, to improve the "Paying Taxes" indicator for ease of doing business in Bangladesh.
It also includes proposals for bringing changes to VAT & SD Act and customs act.
Mohammad Al Maruf Khan said to promote agriculture, the government should allow tax incentives through a statutory regulatory order.
He suggested that the NBR should reduce a threshold limit such as up to Tk25 lakh to minimise the evasion manipulation.
Speaking as the chief guest, Planning Minister MA Mannan said ICAB's web-based document verification system (DVS) will enhance transparency of financial information, which ultimately will reduce the tendency of evasion of taxes.
He further said considering the cost related to tax collection, it is better to chase the evasion of tax by big taxpayers than chasing marginal taxpayers.
Md Alamgir Hossain, member (Tax Policy), Md Masud Sadiq, member (VAT Policy), and Syed Golam Kibria, member (Customs Policy & ICT), of the NBR participated in the conference as special guests.