Tax-free income limit to be raised

The government is likely to increase the tax-free income limit for individual taxpayers and slash the corporate tax rates to encourage private investment in the incoming fiscal year, said finance ministry officials yesterday.

Individuals who earn up to Tk 2.70 lakh annually may get relief from paying taxes next fiscal year, said a senior official of the ministry.

Tax-free income ceiling has remained unchanged at Tk 2.50 lakh since 2015-16, prompting analysts and business chambers to urge the government to raise the ceiling given the erosion of purchasing capacity of low and fixed earners for inflation.

The Centre for Policy Dialogue last month suggested raising the tax-free income limit to Tk 3 lakh in 2018-19 and the Federation of Bangladesh Chambers of Commerce and Industry to Tk 3.50 lakh.

“The gradual increase of inflation and the declining average monthly real wage of individuals have been putting pressure on the disposable income of lower-middle and middle-income households,” the CPD said.

The independent think-tank also suggested reducing the personal income tax rate for the first slab to 7.5 percent from the existing 10 percent.

People close to framing fiscal measures said the minimum tax, which is Tk 5,000 for taxpayers living in city corporations in Dhaka and Chittagong, Tk 4,000 for other city corporations and Tk 3,000 for the rest of the country may remain unchanged in the next fiscal year.

However, taxpayers are likely to get higher tax rebates.

Entrepreneurs are likely to see cuts in the rate of corporate tax, which the revenue authority collects in six categories, with cigarettes manufacturers and non-listed mobile phone operators facing the highest 45 percent. Companies listed with the stock exchanges pay 25 percent tax and non-listed companies pay 35 percent, according to the National Board of Revenue.

Officials said the government may reduce the number of categories in corporate tax and slash taxes by 1 or 2 percentage points from next fiscal year. 

Tax benefits for establishing factories in special economic zones are also likely to be increased, officials said.

Earlier, various trade bodies, including the FBCCI, demanded slashing of the corporate tax rate for the incoming fiscal year.

In response to demands, Finance Minister AMA Muhith agreed to bring down the rates in 2018-19, when the NBR will likely be tasked with collecting Tk 296,000 crore in tax.

The target would be 32 percent higher than the revised collection target of Tk 225,000 crore for the outgoing fiscal year.

Of the target, the revenue board will have to collect about Tk 110,000 crore as value-added tax, Tk 100,200 crore as income tax and the rest as import tariffs, according to officials.