NBR agrees to exit non-refundable minimum tax system

Aiming to comply with international standards, the National Board of Revenue (NBR) has first agreed to abandon the practice of deducting non-refundable minimum tax at source.

At the meeting with the revenue reform committee yesterday, NBR officials expressed their full support for the reorganization of three existing laws (Customs Law, Value Added Tax and Additional Tax Law), as well as the implementation of a sustainable and transparent automation system to prevent corruption. and Income Tax Law – to meet global standards.

Officials are optimistic that once the reforms are completed properly, both domestic and foreign investors’ confidence in the system will increase.

Local and international businesses constantly express concerns about the tax collection system, especially regarding the non-refundable minimum tax requirement, even if they incur losses.

Md Farid Uddin, a former NBR member and part of the five-member revenue reform committee, told The Business Standard: “Senior officials in the NBR are aware that there are distortions in the current tax collection system, especially with regard to minimum tax as the ultimate solution.” “I agree that these should be removed with a legislative change.”

He noted that NBR officials have expressed their support for reforms that will increase revenue collection and minimize irregularities.

“Senior NBR officials admit that the current revenue management system is neither fully manual nor automated. If full automation is implemented, harassment of taxpayers will reduce significantly and revenue will increase.” he added, noting that revenue officials are willing to provide support. reform.

A senior NBR official, speaking on condition of anonymity, told TBS: “Tax policy reforms have been discussed. It is true that turnover tax and minimum tax collected as a final solution without adjustments violate international standards. These aspects, among others, need to be revised.”

“However, since a significant portion of the tax is collected this way, we are concerned that its immediate elimination could negatively impact revenue. We were forced to implement this tax system due to weak controls and lack of transparency.”

Farid Uddin acknowledged his concern and added: “With proper automation and digitalization in revenue management, revenue collection can be doubled from current levels.”

The interim government, led by Professor Muhammad Yunus, established the revenue reform committee on October 9, chaired by former NBR chairman Muhammad Abdul Mazid.

Since Bangladesh’s independence, numerous allegations of harassment and corruption among VAT, tax and customs officials have emerged, and these complaints are increasing.

On the other hand, businesses often face accusations of tax evasion. Despite numerous discussions and initiatives to automate revenue management over the past two decades, implementation has remained minimal.

As a result, complaints of harassment and corruption from taxpayers continue and revenue collections fall short of expectations; It is currently less than 8% of GDP, one of the lowest rates in the world.

Bangladesh’s development partners, including the International Monetary Fund and the World Bank, are also pushing for reforms to increase transparency in the revenue sector.

The Foreign Investors Chamber of Commerce and Industry (FICCI), which represents global businesses in the country, has long advocated the abolition of this tax collection system.

Currently, NBR collects tax deductions at source at rates ranging from 0.5% to 30% across at least 55 sectors; this accounts for more than 50% of the total income tax collection.

In FY24, NBR collected Tk 1,31,102 billion as income and travel taxes, a significant portion of which consists of minimum tax and turnover tax.

FICCI president Zaved Akhter welcomed this initiative and described it as the “right step at the right time”.

Zaved, who is also the managing director of Unilever Bangladesh Limited, one of the country’s largest fast-moving consumer goods companies, added that if Bangladesh adopts this decision, a clear roadmap for implementation will be required.

“It would be beneficial if the minimum tax system is reduced and some facility is provided for refunds or adjustments. Our organization is ready to assist the committee if they request our opinion,” he said. “If Bangladesh’s revenue system complies with international standards, trust will be built among global investors.”

Abdul Mazid, chairman of the reform committee, refused to comment on the issue but said: “We will meet with other sectors interested in revenue mobilization, including businesses, and aim to complete our report soon.”

Farid Uddin said, “We are working with the aim of completing our work within the next four months.”