NBR report: Direct tax exemptions hit Tk 1.07tn in FY23, equalling 99% of total collection

Corporate sector enjoys 69 percent of exemptions as NBR maps “tax expenditure” under IMF conditions

The government has provided Tk 1.07 trillion in direct tax relief in the 2022–23 fiscal year, nearly matching the amount collected from personal income tax and corporate tax.

The tax exemptions accounted for 99 percent of the total revenue collected from these sources during the fiscal year, according to a National Board of Revenue (NBR) report released on Thursday.

In 2022–23, the NBR collected Tk 1.08 trillion in direct taxes.

As a share of gross domestic product, the tax relief stood at 2.39 percent.

Without these exemptions, the tax-to-GDP ratio would have been higher by the same margin.

The report shows Tk 739.89 billion in relief was granted in corporate tax, accounting for 69 percent of total direct tax exemptions.

Of this, the largest share -- Tk 125.89 billion -- was provided to the microcredit and social welfare sector, representing 17.01 percent of corporate tax relief.

The power and energy sector received Tk 79.87 billion in tax relief, while Tk 70.71 billion was exempted in capital gains.

The ready-made garments sector received Tk 58.29 billion.

In contrast, Tk 331.43 billion in tax relief was granted in personal income tax, making up 31 percent of total direct tax exemptions, with a significant portion attributed to salary-related exemptions.

The report noted that exemptions on income beyond basic salaries for government employees, and up to one-third or Tk 500,000 for private sector employees, contributed to the higher share.

Specifically, Tk 53.25 billion in tax relief was given on salary income.

Additionally, Tk 26.71 billion in exemptions was provided on income from poultry and fish farming, while Tk 8.17 billion was granted in tax relief for stock market investments.

The NBR refers to such exemptions as “tax expenditure”, which includes rebates, exemptions, reduced tax rates and exclusions from total taxable income.

Following a loan agreement with the International Monetary Fund amid a dollar shortage, conditions were set to analyse and gradually reduce tax exemptions.

Based on a full year of data, the NBR began this analysis using the 2021–22 fiscal year as a benchmark and also included data for 2020–21 in its earlier reports, which were incorporated into budget documents.

Separate reports on tax expenditure for income tax, value-added tax and customs had also been published previously.

The latest report focuses on direct taxes for 2022–23.

Earlier data showed tax exemptions stood at Tk 1.25 trillion in 2020–21, which declined to Tk 1.15 trillion in the following fiscal year.

The report indicates that direct tax exemptions decreased in 2022–23, with steps observed in recent years to gradually reduce such relief.