Proposed Revenue Collection Activities FY 2023-24

Madam Speaker
Government revenue target is set based on the size of the budget. Government revenue is collected mainly from three sources: (a) NBR tax revenue, (b) non-NBR tax revenue and (c) non-tax revenue. Like previous years, the major portion of government revenue will be collected by National Board of Revenue (NBR). Almost 85 percent of total revenue has been collected by NBR in recent years. The main responsibility of NBR is to collect revenue. Simultaneously, it also works for promotion of industrialization, creating employment, facilitating businesses, protecting local industries and attracting foreign investment. Though our Tax-GDP ratio is comparatively low, revenue collection has exhibited sustainable growth during pandemic and global economic turmoil situation. NBR is steadily inching towards SMART NBR aligned with the vision of SMART Bangladesh.
Our revenue collection has shown a modest growth up to April 2023 in the current fiscal year despite Ukraine-Russia war and many others global economic turmoil. Despite all the barriers, we are trying to maintain the momentum of economic and GDP growth. Our fiscal policy is being planned taking into consideration the global instability and tension in international trade and commerce. This year’s budget put emphasis on creation of employment and industrialization so that people can face the challenges of LDC graduation alongside revenue collection.
Budget for the FY2023-2024 has been formulated with a view to accelerating the growth of the economy. Also various measures have been taken to prepare for LDC graduation, creating new jobs, sustain GDP growth, promote local industries, increase investment through protection and trade facilitation, development of export oriented and heavy industrial enterprises and promote Made in Bangladesh. I am now placing the proposals before this august House on import duty, Value added tax and income taxes in the budget for FY2023-2024 taking due notes from the proposals of various organizations, business community and in consultation with the related stakeholders.
Madam Speaker
Bangladesh will soon graduate from the Least Developed Country (LDC) category. We are moving forward with the goal of becoming an upper middle-income country by 2031 and a developed country by 2041. In this context, there is no alternative to increasing the tax-to-GDP ratio to sustain the country’s ongoing development. Tax exemption is one of the major obstacles to improve the tax to GDP ratio. Instead of giving tax exemptions, on each case, whether it is project implementation or maintenance work or purchase of essential commodities, the required amount of tax (VAT, import duty, supplementary duty or income tax to be paid) should be allocated in the budget of the related office and required taxes should be paid from that budgetary allocation. We should not issue special orders for exemptions unless there is an extraordinary situation. This will bring transparency in revenue administration and help us to manage budget deficit better. It is my firm belief that the tax-GDP ratio will significantly increase if the tax exemption is reduced and this will accelerate revenue collection.
Madam Speaker
The following factors have been considered while making proposals about customs duty, regulatory duty, supplementary duty and value added tax at the import stage:
* Taking necessary steps to protect our economy from the present global crisis;
* Investment and employment generation and judicious use of foreign currency;
* Diversification of export-oriented industries and giving incentives to the backward linkage factories;
* Expansion and development of health, agriculture, fisheries, livestock, electronics, ICT sectors and heavy industries;
* Improvements in ease of doing business in Bangladesh;
* Attracting foreign direct investment to Bangladesh; and
* Rationalization of tariff structure at import stage to protect the development of local industries and also enhancing revenue collection (including value added tax and income tax).
Madam Speaker
Initiatives have been taken to provide easy and seamless services to the taxpayers, traders and citizens by automation and digitization of the Income-tax, Customs and VAT wings of the National Board of Revenue. Most of the reform measures have already been implemented by this time. Electronic payment (e- payment) system has become very popular among the taxpayers. Government revenue can now be paid online by automated treasury challan (A-Challan). Taxpayers can now pay taxes easily from their bank accounts directly.
Income tax is an effective system of establishing equality and social justice. Special emphasis is always given on direct tax. Instead of raising tax rates initiatives are taken to bring more tax payers in the tax net, reform tax policy, expand tax-base, encourage e-TIN holders to file returns and encourage voluntary compliance. Income tax department has taken steps for submission of returns by non-filer companies. Under a joint initiative of the National Board of Revenue (NBR) and the Institute of Chartered Accountants of Bangladesh (ICAB) the Document Verification System (DVS) is successfully running to verify the accuracy of audited accounts submitted by the taxpayers. This initiative has increased authenticity and transparency in income shown by the taxpayer company. National Board of Revenue (NBR) and Bangladesh Road Transport Authority (BRTA) has collaborated for exchange of information through system integration for data exchange, data pulling, data storing and data accuracy verification. As a result of this initiative, new taxpayers are being identified and unpaid taxes are being collected. E-TDS system has also been introduced to monitor tax deduction and collection at source. E-filing system has been introduced for taxpayers to file their income tax returns online. This initiative has made it easier for taxpayers to file their income tax return and the number of new taxpayers is also increasing. At present number of e-TIN registered taxpayers is 87 Lakhs plus. Until April this fiscal year, NBR received 31.7 lakhs tax returns from taxpayers, mainly individuals, which was 22 percent higher than that of the same period in fiscal year 2021-22. The latest growth is the highest in five years. Various policy measures and the requirement of proof of submission of return (PSR) to get different government services have driven the growth of tax returns. Expecting that overall return submission may grow to 35 lakhs at the end of this fiscal year.
Madam Speaker
The VAT and Supplementary Duty Act, 2012 has been implemented since 01 July 2019 by simplifying Value Added Tax Act and Rules to ensure international best practices and business friendly environment are promoted. To make this law more effective and online based, the VAT Online Project has been implemented successfully. Automated registration and submission of return online is a significant accomplishment of this project. VAT registration, return submission and related other activities can now be done online.
Madam Speaker
A new Customs Act, 2021, incorporating international best practices, has been drafted. It has been sent for vetting on 19 January, 2021 and legislative wing completed the vetting on 15 March, 2023. It is now under process after vetting activities. It will be placed in this August House very soon. Automation and use of ICT started in the custom administration many years ago. Web-based ASYCUDA World System is being used in custom operation. ASYCUDA is connected with the computer system of Bangladesh Bank, Sonali Bank, all scheduled banks, BEPZA, CCI&E, BRTA, IATA, Chittagong Port Authority and other major stakeholders. It has helped monitoring of e-LC, container management through manifest data sharing, prevention of money laundering, dangerous cargo monitoring and assessment of imported goods and exports. To introduce paperless customs several modernization initiatives, such as National Single Window (NSW), Automation of Bond Management, introduction of Authorized Economic Operator (AEO) and establishment of Customs Risk Management Commissionerate to use risk management techniques are underway. It is expected that successful implementation of these initiatives will speed up customs clearance and will bring dynamism in import-export trade.
Madam Speaker
Several reforms initiatives are underway to increase capacity and efficiency of revenue administration. All the training academies under the National Board of Revenue are being modernized to impart effective and timely training. Expansion activities of National Board of Revenue are underway with the dual aim of improving the quality of services and increasing tax revenue collection. We firmly believe that the National Board of Revenue will be able to meet the revenue target set for the FY2023-2024 by taking advantage of effective tax policy, efficient revenue administration and with participation of all stakeholders including businessmen.

Peoposal on Income Tax, Value Added Tax and
Import-Export Duty
Direct Tax: Income Tax
Madam Speaker
Direct tax or income tax is an effective system to promote equality and social justice through income redistribution, which results in favorable economic growth and development for all citizens of the country. Income tax is a progressive tax system where tax collected from the wealthy taxpayers can be spent to meet the needs of the poor and low-income people. Through this system, it is possible to address discrimination in income and wealth alongside meeting revenue expectations of the state. At present, the share of income tax to the total tax revenue collected by the National Board of Revenue (NBR) stands at around 35 percent. Despite the outbreak of COVID19 pandemic, income tax recorded an average growth rate of 16 percent or above in recent years, and this growth is continuously maintaining an upward trend. Due to post COVID 19 recovery of world economy, product prices are increasing in the international market since 2021. Apart from this, product price level is beginning to destabilize in the world economy because of Russia Ukraine crisis. It is a challenge for us to cope up with the increase in price of crude oil, natural gas and essential products in the international markets. There is no alternative to internal revenue to overcome this challenge. In the proposed budget, policy initiatives have been undertaken with a view to creating employment through attracting large public/ private investments, facilitating creation of new industry and commerce as well as strengthening sustainable revenue management and collection activities.
Madam Speaker
Bangladesh has become a role model in the world under the charismatic, visionary and astute leadership of Honorable Prime Minister. At present, Bangladesh is the 35th largest economy of the world whereas once upon a time the country was one of the 10 poorest countries. In support of making a smart Bangladesh, as per instruction of Honorable Prime Minister, a taxpayer, business and investment friendly policy has been adopted to collect taxes to establish a strong tax culture in the country. The main objective of this policy is to increase contribution of direct taxes in total revenue to 42% and 50% by 2031 and 2041 respectively. As part of the strategy for collecting targeted revenue from internal sources, digital transformation, tax net expansion and administrative capacity building activities are ongoing.
Madam Speaker
At this point I am presenting some important proposals relating to income tax for the FY 2023-2024 before this august House through you.
Madam Speaker
The tax-free income threshold, tax rates and tax slabs for individual tax payers, other than companies and local authorities, have remained unchanged since FY 2020-2021. The unchanged tax-free income threshold on the one hand, the loss of real income due to inflation on the other, and considering the matter of comfort of the genuine and valued taxpayers with regard to payment of taxes, I propose to increase the tax-free income threshold applicable for the individual taxpayers, other than companies and local authorities. This reduction of tax burden will hopefully give them some relief and encourage them to pay taxes regularly. I, therefore, propose to increase the tax-free income threshold of male taxpayers from Tk. 3 lakhs to Tk. 3 lakhs 50 thousand and tax-free threshold of female taxpayers and taxpayers above 65 years of age from Tk. 3 lakhs 50 thousand to Tk. 4 lakhs respectively. At the same time, I propose the minimum tax rate for individuals at 5 percent and the maximum tax rate for them at 25 percent. The following table presents the proposed tax-free income threshold, tax rates and tax slabs for all categories of individual taxpayers except companies and local authorities:
Madam Speaker
Existing minimum tax for a taxpayer, except company taxpayer, residing in Dhaka North City Corporation, Dhaka South city corporation and Chittagong City Corporation is Tk. 5,000, any other city corporation is Tk. 4,000 and other area is Tk. 3,000. I propose to maintain this structure of minimum tax unchanged for the next year as well.
Madam Speaker
One of the responsibilities of a citizen in a country is to ensure their participation in government’s welfare work by paying minimum tax in return of the privileges provided by the state to them. I propose to make the minimum tax two thousand taka among competent people who are below taxable income but has obligation to submit income tax return to take service from government with a view to circulating this participation in government welfare work.
Madam Speaker
Surcharge is collected from wealthy individual taxpayers in Bangladesh at certain rates based on their income tax. This provision of surcharge has been in force for the last few years. Surcharge of individual taxpayers ensures balanced distribution of income and wealth along with economic development of society. In case of levy surcharge, on the basis of individual taxpayers disclosed net wealth value to simplify enforcement of surcharge levy and reduce the burden of the middle-class taxpayers, I propose to raise the limit of surcharge from Tk. 3 crore to Tk. 4 crore. I propose a minimum surcharge amounting to 10 percent, where net wealth of an individual exceeds Tk. 4 crore and 35 percent surcharge for individuals who have net wealth exceeding Tk.100 crore.
Madam Speaker
At present, there are several corporate tax rates currently in effect in Bangladesh. Based on the compliance with terms of transaction that all income, expenditure and investment of taxpayers must be transacted through formal channel, the current tax rate of non-listed companies, artificial personality created by law not otherwise defined and other taxable entities varying from 30 percent to 27.5 percent. Also, to facilitate formalization of the economy and to incentivize formation of One Person Company (OPC), the current tax rate for non-listed companies for OPCs varying from 25 percent to 22.5 percent. The current tax rate is 20 percent for listed companies that issue shares worth more than 10 percent of its paid up capital through initial public offering (IPO) and 22.5 percent which companies issue shares worth 10 percent or less of it’s paid up capital through initial public offering(IPO). But in this case, the tax rate would be 22.5 percent instead of 20 percent and 25 percent instead of 22.5 percent for applicable listed companies if the companies fail to comply with the conditions that all expense, investment and receipts or income except fixed annual cash expenditure and investment must be made through bank transfer. From FY2020-2021 to FY2022-23 the corporate tax rate has been reduced every year. Considering all these, as a part of efforts to achieve tax GDP growth targets I am proposing to retain the existing structure of corporate tax rate. I propose the following corporate tax rate for FY2023-2024 applicable for taxpayers other than individuals-

Madam Speaker
Compared to other developing and developed countries, the tax-GDP ratio of Bangladesh is not that encouraging. It is essential to raise our tax-GDP ratio significantly in order to support our graduation to a developed country. We need to expand the tax net by bringing all eligible citizens of the country within the tax net, which in turn will enhance our capacity to tap more revenue and expand the size of the formal economy. Around 88 lakhs persons currently hold ETIN in Bangladesh. Taking some practical initiatives in last year’s budget proposal, the number of submitted income tax return has increased by 25 percent in the current financial year in comparison to that of the previous year. The number of returns is around 32 lakhs though the number is not as per expectation. Following various models of the developed countries, I propose to formulate the rules for Tax Return Preparer (TRP) with a view to expanding the tax net through new individual taxpayers. We hope that in e-return platform, through Tax Return Preparer (TRP) we will be able to make submission of a lot of new income tax return along with raising number of taxpayers holding TIN in this year.
Madam Speaker
The present government is following the principle of gradual expansion of tax base along with constant rationalization of tax rate. In compliance with this policy, new areas of revenue collection are prepared and for the purpose of bringing equal competition in business we are proposing the followings in the budget:
a) To increase the tax rate at source rationally during land registration in areas under and outside the jurisdiction of Rajuk and CDA;
b) To rationalize tax rate at source with a view to reduce tax refunds on imports of manganese which is a raw material for steel production;
c) To rationalize tax rate at source on supply of locally produced 33 to 500 KV cables.
Madam Speaker
Due to the unstable war situation in the world, there are signs of recession in the global economy. In this case, we have to face a difficult situation in the next financial year. We have to deal with the situation through formulating financial rules and implementation of it with great prudence and foresight. I propose multi-modal increase in travel tax rates to reduce unnecessary foreign travel among the public, inculcate austerity habits and create new revenue streams in economy. This policy will give us more revenue on the one hand and save dollars on the other hand by reducing unnecessary foreign travel.
Madam Speaker
At present, Bangladesh has played a leading role in the developed world under the firm leadership of the honorable Prime Minister. The government has adopted a policy of progressively following the best practices of the Income Tax Act with the developed world. In continuation of this, the idea of imposing taxes on sectors that are harmful to public health is prevalent in the developed world and as an initiative to reduce environmental pollution in the country, I propose to impose various cc or kilowatt-based environmental surcharges on multiple vehicles.
Madam Speaker
“Direct Tax Expenditure” means rebates, discounts, exemptions, reduced rates of taxation and exclusion of income from computing total taxable income. It is a type of tax subsidy. That means, if this subsidy was collected as tax, it would be added to the total tax collected and the amount of tax would increase. The “Direct Tax Expenditure” will also be included in the total subsidy along with other subsidies of the government. However, “Direct Tax Expenditure” creates overall employment along with economic stimulation, social balance and industrial support. In line with international best practices, the Income Tax Department of the National Board of Revenue has for the first time in Bangladesh estimated “Direct Tax Expenditure” based on the analysis of field level factual data, which has been achieved entirely through the efforts of the Income Tax Department.
The total estimated amount of the said “Direct Tax Expenditure” applicable for the financial year 2020-2021 is Tk 1,25,813 crore, of which Tk 85,314 crore is at the corporate level and Tk 40,499 crore at the individual level. Overall, this “Direct Tax Expenditure” is 3.56% of total GDP for the fiscal year 2020-2021. Taking into account the projected total GDP size of 2023- 2024, the total amount of projected “Direct Tax Expenditure” for the current financial year will be Tk 1,78,241 crore. Adding the estimated subsidy amount to this brings the total subsidy amount to Tk 2,89,228 crore.
Micro Finance, 15315, 12% Remittance, 11287, 9% Power and Energy, 8380, 7% Economic zones & Hi Tech indusry, 4612, 4% Garments & Textile, 3438, 3% Poultry & Fisheries, 3120, 2% IT/Software, 1477, 1% Share capital gain, 966, 1% Others including salaries, 77218, 61% Direct Tax Expenditure (Crores Tk)
Madam Speaker
The imposition, collection and management of income tax in the Indian subcontinent including Bangladesh was carried out through the Income-tax Act, 1922. The Income-tax Ordinance, 1984 was enacted in 1984 by amending the Income-tax Act, 1922, which is still in force. Instead of ‘Income-tax Ordinance, 1984’ made in English language, the Income-tax Act, 2023 has been made in Bengali language by making it more contemporary and modern. The contents of the provisions made in English of the existing laws have been converted into simple Bengali language. In addition to reducing the discretionary power of officials as much as possible, the proposed law has included accounting methods, depreciation and amortization rules, provisions related to capital gains, income from intangible assets, transfer pricing, alternative dispute resolution provisions, etc. In order to facilitate business and investment, instead of filing 29 returns and statements related to tax deduction at source in the existing law, only 12 returns are proposed in the proposed law. To simplify tax compliance, tax return filing under self-assessment, return process and return audit provisions, international standardization has been ensured, and Earnings stripping rule is included.
Value added Tax
Madam Speaker
In order to continue the progress of economic development, there is no alternative to increasing revenue collection and raising the tax-GDP ratio to the desired level. Bangladesh has the potential to enhance its tax-GDP ratio like other developing and developed countries.