This article by Doultot Akter Mala was originally published in The Financial Express
Direct-tax expenditure in terms of foregone revenues may shrink by Tk 150 billion in the upcoming fiscal year with the bundling out of numerous exemptions from major sectors that include physical infrastructure construction.
As per National Board of Revenue (NBR) estimate, tax expenditure of the income-tax wing would get reduced to Tk 1.63 trillion in the fiscal year 2024-25 against Tk 1.78 trillion or 3.56 per cent of the country’s GDP in the current year, officials said. However, the TE would be still 2.91 per cent of the GDP in the upcoming fiscal year.
The tax expenditure in FY 2021-22 was Tk 1.26 trillion while Tk 1.37 trillion in FY 2022-23. The share of tax expenditures made on account of corporate taxpayers was 68 per cent of the total tax benefits worth Tk 1.26 trillion enjoyed by all taxpayers in the 2020-21 fiscal.
Direct-tax expenditure is defined as rebates, discounts, exemptions, cutbacks, and the exclusion of income from computing total taxable income. It is termed ‘a form of tax subsidy’, which, if collected as tax, would have augmented the total tax-revenue amount.
The NBR estimates the TE following revenue-foregone method as recommended by the OECD. Finance Minister Abul Hassan Mahmood Ali is set to place the estimate of reduced tax-expenditure data in budget speech on June 6, 2024.
Economist Dr Masrur Reaz, the founder and chairman of Policy Exchange Bangladesh, says it’s imperative to review and rationalise tax expenditure as the government is in dire need of mobilising higher domestic revenue for development pending. “Industries enjoying tax exemptions for decades must come under tax net,” he adds. He, however, recommends tax benefit for new and potential industries by fixing a specific time to phase out.
Read the full article