The corporate income tax rate for manufacturers of refrigerators, air conditioners (AC), motorcycles and compressors has been doubled.

Starting from the 2025-2026 fiscal year, the National Board of Revenue (NBR) will be able to impose an income tax of up to 20% on the producers of these products, said a notification issued in this regard on Tuesday.

The NBR said that the revised tax rate will remain in effect until 2032 for these electronic appliances and motorcycle manufacturers.

According to the notification, the new tax rate will be applicable from the 2025-2026 fiscal year and producers in these sectors will have to pay the increased tax on the income earned in the current fiscal year.

The government is focusing on reducing reliance on both domestic and foreign debt, while also boosting revenue collection and capacity. As part of this effort, the decision to raise taxes on manufacturers of electronic goods and motorcycles has been made.

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In January 2023, the International Monetary Fund (IMF) approved a $4.7 billion loan for Bangladesh, subject to certain conditions.

One of the key requirements was the implementation of significant reforms in the country’s tax system. The IMF had recommended a major overhaul to enhance revenue collection.

As part of the ongoing fiscal year 2024-2025, the IMF had urged Bangladesh to raise an additional Tk 12,000 crore in revenue. It also advised the government to implement a coordinated strategy to reduce subsidies and settle arrears in the electricity and fertiliser sectors.

Bangladesh currently has the lowest tax-to-GDP ratio globally, which, combined with extensive tax exemptions, has left the government grappling with financial deficits. For the 2024-2025 fiscal year, the government has provided Tk 163,000 crore in tax exemptions.

The NBR began offering tax incentives to manufacturers of refrigerators, air conditioners, and motorcycles in July 2009.

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Initially, a 5% corporate income tax rate was applied for a 12-year period. Over time, these tax incentives were expanded. But, in the fiscal year 2020-2021, the tax on these products was increased to 10%.

As part of the "Made in Bangladesh" initiative, the government has been providing such incentives to promote locally produced goods.