Tax
Land and property registration cost doubles
The tax on property registration has been doubled under the Income Tax Act 2023 in all areas of the country including Dhaka, Chattogram, Narayanganj, and Gazipur.
Whether transferring immovable property or land and flats in any area of Bangladesh, acquisition of ownership requires double taxation, as per the new Income Tax Act.
Under the Income Tax Act 2023, the National Board of Revenue (NBR) has fixed the new tax in the source tax rules. After taking the final decision in this regard on June 26, the Act was published in the gazette on July 3.
Also read: Tk 2,000 min tax for TIN holders won't be imposed; Finance Bill 2023 passed in parliament
The owners of immovable property in Gulshan, Banani, Motijheel, Dilkusha, North South Road, Motijheel and their extended areas, and Mohakhali area of the capital have to pay the highest amount as registration tax.
For buying property in these areas, a buyer has to multiply 8 percent tax per Katha or Tk 20 lakh, whicever is the maximum will be taken into consideration in taxing for registration of land, flats, or any other structures. This is considered as the highest property tax ever.
According to Section-6 of the Income Tax Act 2023, entitled 'Collection of Tax on Transfer of Property', property registration, tax has been increased from 4 percent to 8 percent in various areas of Dhaka, Chattogram, and Narayanganj.
Also read: JS passes bill to curb discretionary powers of income tax officers
Besides, the tax has been increased from 3 percent to 6 percent in Gazipur, Munshiganj, Manikganj, Narsingdi and Dhaka, and Chattogram areas outside the City Corporation and municipal areas.
Apart from this, the property tax under the jurisdiction of any municipality in Bangladesh has been increased from 2 percent to 4 percent and in other areas from 1 percent to 2 percent.
Earlier on June 1, the finance minister made a proposal in this regard in his budget speech. And that proposal was included in the new rules.
Also read: Building owners to get 10 percent holding tax rebate for rooftop gardening: LGRD Minister
A senior official of NBR told UNB that to achieve the revenue collection target; it is natural to increase the tax rate.
“In our jurisdiction, this sector has huge revenue generation opportunities. Moreover, the difference between the real value and deed value of almost all land or flats across the country including the capital is huge. Although, we have increased the tax rate on deed value,” the official said.
Those who have the ability to buy immovable property in the capital, have the ability to pay that tax, he said.
Also read: Income Tax Bill 2023 placed in Parliament
Tk 2,000 min tax for TIN holders won't be imposed; Finance Bill 2023 passed in parliament
Finance Bill 2023 was passed on Sunday (June 25, 2023), dropping the much-debated proposed provision for Tk 2,000 for every TIN holder during submission of their income tax return.
Finance Minister AHM Mustafa Kamal moved the bill and it was passed by voice vote.
The finance minister accepted some other minor proposals on the finance bill in section 2 and 2-Ka.
The other amendment proposals were rejected by a voice vote.
Read more: Several reform initiatives on the cards as govt moves to shore up economy
The finance minister accepted an amendment scrapping specific duty on import of fuel oil by reinstating the previous tax on value as concerns grow over a significant hike in prices of petroleum products under the new tax measures.
The specific duty on oil imports came into effect on June 1, 2023, under the ‘Provisional Collection of Taxes Act 1931 (Act No. XVI of 1931) in the Finance Bill placed before parliament on that day.
Customs Duty, VAT and Advance Tax on the import of fuels have been reinstated in the Finance Act 2023, as those were scrapped in the bill.
The proposed value-added tax (VAT) on the manufacturing of ballpoint pens has been cut to 5 percent from 15 percent.
Read more: e-TIN: Online registration process in Bangladesh
In the Finance Bill on June 1, the finance minister proposed Tk 2,000 as minimum tax on those who have no taxable income but need to submit tax returns for availing government services.
Several reform initiatives on the cards as govt moves to shore up economy
To address the present crisis on the economic front and ensure resilient, inclusive, and sustainable growth, the government of Bangladesh has adopted several reform initiatives to be implemented in the medium term (2025-26).
The significant reform actions include: Revenue Mobilisation, Improved Expenditure Management, Monetary and External Sector Management, Financial Market Regulation and National Income Accounts, according to a budget document.
The government has focused on reforms in tax policy and revenue administration. The plan is to mobilise additional tax revenue of about 1.7 percent of GDP by the end of FY 2025-26. Currently, the tax-to- GDP in the country is below ten percent.
Read: Bangladesh’s economy has a dignified position now: PM
Moreover, the government is focusing on untapped areas in the tax-revenue sector to enhance overall revenue while also emphasising non-tax revenue sources.
The document states that fiscal management has become increasingly complex due to elevated and unpredictable inflation that has the potential to undermine the soundness of financial institutions and fiscal operations.
The uncertainty surrounding prices, wages, and interest rates influence inflation through aggregate demand and expectations, which in turn posed challenges to fiscal planning and budgetary preparations.
Read: 1st Circular Economy Summit in Dhaka on June 15
Besides rationalising the subsidies, there is a plan to bring down the cost of borrowing and bring efficiency in debt management, the document said.
It said that the net National Savings Certificate (NSC) issuance is planned to be brought down to below 1⁄4 of total net domestic financing by FY26.
The government plans to optimise cash management by expanding the coverage of the treasury single account (TSA) and the use of electronic funds transfer (EFT).
Read: Govt to introduce circular economy to prevent plastic pollution: Minister
Several reform measures have been implemented including the reduction of interest rates of saving certificates, the introduction of tiered interest rates, capping issuances, and increasing taxes on earned interest, all aimed at reducing the government's interest expenditure.
In FY 2021-22, the contribution from national savings certificates accounted for 0.5 percent of GDP, a decrease from 1.2 percent in FY 2020-21. Efficient cash management is also a priority to save public funds by minimising interest expenditure.
To achieve this, the government is strengthening and expanding the Treasury Single Account (TSA), which is expected to facilitate better cash management, reduce interest expenses, and improve commitment controls.
Read more: Increased import costs putting pressure on economy in many ways: Minister
In the Monetary and External Sector Management segment, to improve monetary operations, Bangladesh Bank will adopt an interest rate corridor system.
Furthermore, to increase exchange rate flexibility, Bangladesh Bank will use market-determined exchange rates for official foreign exchange transactions on behalf of the government.
To strengthen the external sector balance and improve monetary sector performance, Bangladesh Bank is going to implement several reform initiatives in the medium term.
Read more: Budget not based on IMF conditions: Finance Minister
There will be reform activities to unify the multiple exchange rates and bring more discipline to the foreign exchange market.
Bangladesh Bank will reverse the temporary margin increases for opening letters of credit on nonessential imports.
The official budget document says that “With a view to establishing a risk-based banking supervision system, Bangladesh Bank will complete the pilot risk-based supervision action plan.”
Read more: CPD dismisses budget's projections on growth, inflation, revenue collection
Also, it mentions that to improve governance and discipline in the financial market, the government will amend the Bank Companies Act and Finance Companies Act in line with best practices. The amended Bank Companies Act was accordingly passed last week.
For better transparency, Bangladesh Bank will publish banks' distressed assets in the annual financial stability report.
Bangladesh Bureau of Statistics has taken the initiative to publish quarterly GDP for having a clear view of national income accounts.
Read more: Doing our best to keep economy going amid global recession: PM Hasina
Reduce tax burden on individuals and corporates: FICCI
The Foreign Investor’s Chamber of Commerce and Industry (FICCI) has expressed some concerns about the proposed national budget for the fiscal year 2023-2024 and draft Income Tax Act (ITA), 2023 which will have implications for the businesses and individuals in Bangladesh.
FICCI expressed concern over perceived inadequacy of allocations for the health, agriculture and education sectors in the budget at a press briefing on Wednesday.
The draft Income Tax Act (ITA), 2023 also required extensive reviews as some of the provisions in the law seems unreasonable as compared to the Income Tax Ordinance, 1984, they said.
Also read:Proposed budget targets are challenging: FICCI
“The progressive changes proposed by our government is applaudable, however, the growth of the businesses and individuals may slow down with the disclosure of some of the provisions which will raise more tax burden,” said FICCI President Ezaz Bijoy.
“The imposed vat on locally manufactured mobile phones and increasing tax burden on loss making companies may aggravate the situation. We have some recommendations regarding solutions that may prevent the probable adverse situation. We hope that the recommendations are taken into consideration and allow the chamber to extend its continued support to the Government of Bangladesh and work together toward the development of the country by developing a tax-friendly environment,” he said.
FICCI also expected gradual withdrawal of minimum tax provisions in the new law instead it has been increased significantly, particularly on carbonated beverage industry from 0.6% to 5% of Gross Receipts (8X increase).
Also read: FICCI roundtable upholds importance of FDI to Vision 2041
Limiting cash transaction for corporates and organizations will put a cap on development as the country is yet to achieve total cashless transaction. Government should allow companies to spend a minimum percentage of its expenses rather than setting a definite number and set a target to achieve the 100% cashless goal in next 5 years, the press briefing also said.
FICCI also proposed reduction of arbitrary power of officers in tax procedure and suggested implementation of comprehensive digitalization of the three wings of NBR and externally connected systems for seamless transaction.
FICCI officials including Deepal Abeywickrema, Sr VP, Engr Abdur Rashid, member of Board of Directors, Sazzad Rahim Chowdhury, coordinator of Tarrif-Taxation and Regulatory Affairs Committee, were present at the press conference, among others.
Also read: 50 years of Bangladesh: FICCI to unveil 3 growth drivers on FDI
Building owners to get 10 percent holding tax rebate for rooftop gardening: LGRD Minister
Building owners in all city corporations and municipalities will get a 10 percent rebate on the holding tax for rooftop gardening, said Local Government, Rural Development and Cooperatives Minister Md Tajul Islam on Wednesday (June 14, 2023).
“The decision has been taken to bring down the temperature,” said the minister at a meeting at the conference room of the Local Government Division at the Secretariat.
Read: Environmental discipline needed to realise 'livable Dhaka': LGRD Minister
Talking about upcoming Eid-ul-Azha, he said that instructions have been given to the authorities concerned to clear the sacrificial animal waste by evening of the Eid day.
“Animal waste is usually removed by the evening. This time too, the same instructions have been given. Besides, animals will have to be sacrificed at designated places,” he said.
Read: Govt takes up masterplan to prevent river pollution in and around Dhaka: LGRD Minister
Efforts have been made to ensure that there will be no pollution from sacrificial animal waste, the minister added.
DSE urges tax exemption on earned interest in bond market
The Dhaka Stock Exchange (DSE) on Tuesday urged the government to consider its 6-point proposal on the budget for the fiscal year 2023-24, to encourage investment.
DSE Board of Directors Chairman, Professor Hafiz Hasan Babu made the call from a 'post-budget press conference' at a hotel in the capital on Tuesday.
The proposals are tax-exemption for earned interest on bonds, to reduce the tax gap between listed and non-listed companies to 10 percent, reduce VAT from 15 percent to 10 percent for companies in the capital market, reduce the tax gap to 10 percent for stock exchange SME companies, and reduce tax at source on broker houses’ transactions.
Also Read: DSE seeks inclusion of four points to facilitate investors
In a written speech at the press conference, DSE Chairman said that currently, the size of the corporate bond market is very small which creates limitations in the capital market as well as in the financial market.
Also Read: DSE market capitalisation increased by Tk4.5 lakh crore in 2022
“A well-functioning bond market can help the economy in several ways. Exemption of tax on interest in all types of bonds would encourage creating a strong bond market," he said.
CPD dismisses budget's projections on growth, inflation, revenue collection
The Centre for Policy Dialogue (CPD), a think tank, in its traditional post-budget review on Friday (June 2, 2023) said the proposed national budget of Bangladesh for FY 2023-24 projected ambitious targets for both GDP growth and inflation, without putting forth any realistic measures to achieve them in light of global and domestic crises.
The CPD said budget focused on increasing tax-GDP ratio, but the revenue growth target is not realistic, so the volume of deficit financing will ultimately widen.
CPD Executive Director Dr Fahmida Khatun led the post-budget review, held at a hotel in Gulshan, and televised live on some tv channels.
She said the budget has been placed at a time when the macroeconomic stability of Bangladesh has weakened significantly.
REad: Proposed budget targets are challenging: FICCI
“The macroeconomic stress is visible on lowering growth of revenue mobilisation and shrinking of fiscal space of current fiscal year (FY 2022-23), soaring borrowing from banks, higher price of daily essentials and decreasing foreign exchange reserve,” she added.
The private credit growth projected to 15 percent in FY 2023-24 that was 14.1 percent in 2022-23. As of April 2023, private sector credit growth was 11.3 percent, she said.
Replying to a query, CPD’s distinguished fellow professor Dr Mustafizur Rahman said the revenue growth projection in 2023-24, compared with actual revenue achievement of FY2022-23, wpi;d be a massive 39 percent, which is "absolutely ambitious" - perhaps even overambitious.
The budget’s growth projection occurred based on a wrong concept, so multi sectoral problems would arrive in the implementing stage of the proposed budget.
Read more: Budget 2023-24: Govt allocates Tk88,162 crore in education sector, up 8.2%
Mustafiz expected a monetary policy reflecting fiscal policy in light of the budget and controlling measures of higher inflation.
Khondaker Golam Moazzem, research director of CPD said the budget technically avoided the capital market development policy, which is very essential for such a developing economy.
“Without establishing a realistic and sustainable capital market, investment financing cannot grow, the government incentive based capital market cannot play a role in new investment in the capital market,” he added.
Towfiqul Islam Khan, Senior Research Fellow in CPD said curiously, no mention was found regarding the accumulation of external payments arrears or new forex reserve.
REad: Finance minister unveils the country’s largest ever budget in Parliament
Details about critical reforms, including shifting towards market-based dollar exchange rate and interest rate and adoption of periodic formula-based petroleum product prices, have not been explained in the budget speech, he said.
The CPD projection said Bangladesh's proposed national budget of FY 2023-24 targets 15.5 percent growth will be around 39.7 percent growth target compared to the current budget achievement and Tk1.42 lakh crore is needed to be mobilized.
Tax-free income limit increases to Tk3.5 lakh
Bangladesh's Finance Minister AHM Mustafa Kamal in his budget speech on Thursday (June 1, 2023) proposed to increase the tax-free income limit to Tk 3.5 lakh from the existing Tk 3 lakh for individual taxpayers for the fiscal year 2023-24.He also proposed the threshold for women and senior citizens above 65 years of age to Tk 4 lakh from Tk 3.5 lakh.
Read more: Finance Minister unveils Tk 761,785 crore national budgetBesides, proposals have been placed for the physically challenged persons and third-gender taxpayers to extend their tax-free income limit to Tk 4.75 lakh from Tk 4.5 lakh and Tk 3.5 lakh respectively.The tax-free income ceiling for the war-wounded, gazetted freedom fighters will be Tk 5 lakh, up from Tk 4.75 lakh.
The proposed tax rates and tax slabs for all categories of individual taxpayers except companies and local authorities are: no tax on first Tk 3.5 lakh, 5 percent tax on next Tk 1 lakh; 10 percent on next Tk 3 lakh; 15 percent on next Tk 4 lakh; 20 percent on next Tk 5 lakh and 25 percent income tax on the balance of total income.
Read more: Budget sets 7.5 percent annual economic growth, inflation at 6 percent
HC asks Dr Yunus to pay over Tk 12 crore as donation tax
The High Court on Wednesday (May 31, 2023) asked Nobel Laureate Professor Dr Muhammad Yunus to pay over Tk 12 crore as donation tax to the National Board of Revenue (NBR).
The HC bench of Justice Muhammad Khurshid Alam Sarkar and Justice Sardar Md Rashed Jahangir passed the order after rejecting the petition of Dr Yunus challenging the notice of NBR.
Barrister Mostafizur Rahman stood for Dr Yunus while Attorney General AM Amin Uddin represented the state.
Read more: ACC sues Dr Yunus, 12 others in case over misappropriation of about Tk 25 cr
On May 23, Dr Yunus filed a petition challenging the notice issued by NBR claiming tax Tk 15 crore on donation.
The HC fixed May 31 for hearing the petition.
According to the petition, NBR served three separate notices claiming Tk 12,28,74,000 as tax against Tk 61.57 crore as donation during 2011-2012 fiscal year, Tk 1.60 crore tax against Tk 8.15 crore as donation in 2012-2013 FY and Tk 1.50 crore as tax against Tk 7 crore as donation in 2013-2014 FY as per the Donation Tax-1990.
Read more: Yunus, Clooney address German Postcode Lottery Charity Gala in Germany
IPPs call for uniform import duty on primary fuels
Removal of discrepancies in the import duties imposed on primary fuels, which are used as inputs in power generation, can reduce the government’s subsidies in the power and energy sector.
The notion is being put forward by the private power producers of the country, also known as IPPs (independent power producers).
They are claiming that the discriminatory import taxes on primary fuels - furnace oil (diesel), coal, and gas (LNG) - ultimately favours the coal-fired power plants that projects the government’s biases towards ‘the dirtiest fuel’.
Currently there is a 5 percent duty on the import of coal, which rises to 34 percent on furnace oil, aka heavy fuel oil (HFO), and 22 percent on gas.
Read more: Ilisha-1 country’s 29th gas field: Nasrul Hamid
As a result, the price per MMBtu (metric million British Thermal Unit) of coal comes to Tk 10-11 and when power is generated from coal, it costs Tk 12-13. After adding 5 percent import duty, the cost of electricity from coal-fired power plants becomes Tk 13-14.
On the other hand, the price per MMBtu of HFO comes to Tk 11-12 and the power generation from the HFO costs Tk 11-12 due to its higher heat value. But when the 34 percent import duty on HFO is added, its power generation cost becomes Tk 15-16 per unit.
In the same way, the cost per MMBtu of imported gas is Tk 11-12 and its power generation cost becomes 10-11 due to its higher heat value. But after adding the import duty of 22 percent, the per unit electricity generation cost from gas-fired plants goes up to 13-14 per unit.
“If the discrepancies are removed from duty regime, and import duty on all fuels is made uniform at 22 percent, the production cost of electricity from diesel-fired plants will be lower than that of coal-fired power plants,” said Imran Karim, former president of Bangladesh Independent Power Producers Association (BIPPA), the trade body representing the interests of private power producers.
Read more: Many big industries using illegal gas connections: Nasrul Hamid
Karim, also the vice chairman of Confidence Group, a leading firm in private power generation, said the duty should be uniform considering the government’s commitment to support cleaner fuels - coal being the original dirty fuel. Furnace oil of course is no better.
“The government will receive more revenue from imported fuels, if the duty on all fuels are equalised,” he added.
According to the Power, Energy and Mineral Resources Ministry’s estimate, in the current fiscal 2022-23, the power and energy sector will require over Tk 23,000 in subsidies to cover its losses.
Of this, the power sector will require Tk 18,000 crore while around Tk 6000 crore would go on primary fuels.
Read more: New PSC: Petrobangla awaits final nods to invite int’l bidding for offshore blocks
Earlier, the loss in the sector was estimated much higher at over Tk 70,000 crore due to the excessive price hike of gas, coal and petroleum fuel following the war in Ukraine that began in February 2022.
But after the enhancement of fuel prices on the domestic market by more than 40 percent pn average and power tariff by more than 15 percent, the losses came down and subsequently the requirement for subsidy was also reduced to around Tk 23,000 crore, said officials at the Ministry of Power, Energy and Mineral Resources.
Private power producers claim that if the import duty on coal and furnace oil were made the same as that on gas, i.e. 22 percent, it would reduce overall costs and thus reduce the subsidy as well.
“Because, the power generation by furnace oil-based plants will automatically go down and it will ultimately have an impact on the overall tariff structure in the power sector by seeping through to both the wholesale and retail levels,” said an IPP plant operator.
Read more: Petrobangla initiates move to end foreign company’s monopoly in pre-paid gas metering system
Power Cell director general Mohammad Hossain said that both coal and furnace oil are dirty fuels, so by the IPPs’ logic, the import duty on these two fuels should be higher than on gas - not uniform.
“The import duty on coal and HFO should be equal and import duty on gas could be comparatively lower as it is the cleanest of the three,” he said.