Kamal keeps tax-free income limit, corporate tax rates unchanged for FY20

AHM Mustafa Kamal has proposed keeping tax-free income limit for individuals and corporate tax rates unchanged in his maiden budget.

In parliament on Thursday, the finance minister noted that general tax exemption threshold for income tax has been Tk 250,000 for the last few years. The ceiling has been Tk 300,000 for female taxpayers.

In developed countries, tax exemption threshold for income is generally less than 25 percent of per capita income while some countries even do not have any threshold limit, he said.

It is mostly equal to or below per capita income in developing countries while the tax exemption threshold is almost 1.5 times the per capita income in Bangladesh.

Kamal fears that any increase in the tax exemption threshold will push a “significant” number of taxpayers out of the tax net, “which will eventually erode the tax base”.

Moreover, the taxpayers “got habituated” with the unchanged rate of tax, according to Kamal.

CORPORATE TAX

Multiple corporate tax rates are in existence for different corporate sectors. It is 5 percent for publicly traded companies and 35 percent for companies not listed on the stock market.

A good number of corporate sectors are also enjoying reduced tax rates and tax exemptions.

The tax rate for banks and financial institutions was reduced by 2.5 percent from last year, which resulted in “significant reduction” of tax collection from this sector, he added.

He concluded that the government finds “the effective corporate tax rate in Bangladesh is below 5 percent”.

Kamal proposed to raise the minimum tax for mobile companies to 2 percent on their turnover from 0.75 percent earlier