Tax exemptions over Tk 107,000cr in a year, 2.39pc of GDP

In Bangladesh, the amount of tax exemptions given in the income tax sector in one fiscal year has stood at Tk107,132 crore, which is equal to 2.39per cent of the country’s gross domestic product (GDP).

That is, almost the same amount of revenue that the government currently collects from direct taxes is being given in tax exemptions in various sectors.

This information has emerged in a report published by the National Board of Revenue (NBR).

The report published on Thursday provides a detailed account of income tax exemptions and tax exemptions given in FY23.

According to the report, a large portion of the total tax exemptions went to the corporate sector.

In one fiscal year, Tk73,989 crore was given in corporate income tax, which is about 69per cent of the total tax exemptions.

On the other hand, Tk33,143 crore was given in individual income tax, which is about 31per cent of the total tax exemptions.

The NBR report shows that the microfinance and social welfare sectors have received the highest tax breaks among corporate taxes. The annual tax breaks in these sectors are Tk12,589 crore.

Then, the electricity and energy sector has been given a tax break of Tk7,987 crore.

The capital income sector has received a tax break of Tk771 crore and the readymade garment industry has received a tax break of about Tk5,829 crore.

According to analysts, tax incentives have been given to these sectors for a long time to increase investment and employment.

Among individual taxpayers, the highest tax break has been given in the field of salary-based income.

The tax break in this sector is Tk5,325 crore.

In addition, people involved in the poultry and fish farming sector have been given a tax break of Tk2,671 crore.

About Tk817 crore has been given a tax break to encourage investment in the stock market.

Although tax breaks are given in various sectors every year, there has been a debate about this for a long time.

Many economists and policymakers have alleged that influential groups benefit more from these tax breaks.

As a result, the government’s real revenue collection opportunities are reduced.

On the other hand, some industries, including ready-made garments, have developed rapidly through tax breaks, but questions are also being raised about whether it is still necessary to maintain the same level of tax benefits in these sectors.

As part of Bangladesh’s economic reform program, an important condition of the International Monetary Fund (IMF) loan program is to gradually reduce tax breaks.

In that context, the NBR has published a complete account of tax breaks given in various sectors for the first time.

NBR officials say that tax breaks are given to encourage various sectors of the economy.

This increases employment and investment. Although this causes a temporary loss of revenue, in the long run it acts as an investment for the economy.

The report also recommends reforms in the tax incentive system. It says that unnecessary tax breaks should be withdrawn step by step.

It also proposes to align tax incentives with national priorities such as export diversification, green economy, small and medium enterprise (SME) development, gender equality, and regional balance.

According to the NBR, if such reforms are implemented, it will be possible to increase revenue collection without increasing tax rates and will further strengthen transparency and accountability in the tax system.