June 3 marked a remarkable date for Bangladesh as the finance minister presented the country's 50th budget in parliament on the occasion of the 50th year of independence. As expected, the Tk 603,681 crore budget is the largest that has ever been proposed.

The proposed revenue collection target is Tk 389,000 crore. Economic growth goal has been set at 7.2 per cent, expected inflation 5.3 per cent, and overall deficit Tk 214,681 crore.

Tk 10,000 crore has been set aside for Covid-19 response, Tk 71,900 crore was allocated towards education and Tk 225,324 crore for the annual development programme. The finance minister plans to borrow Tk 76,452 crore from the banking sector and Tk 37,001 crore from the sales of savings certificates.

Like last year, this year's budget is once again seen as a business-friendly one.

The tax rate for non-listed companies has been proposed to be cut from 32.5 per cent to 30 per cent, and for listed ones, from 25 per cent to 22.5 per cent. However, it may not please the companies whose advance tax (tax deduction/collection at source) is higher than their regular tax payment.

The business turnover tax rate for individual taxpayers has also been proposed to be reduced to 0.25 per cent from 0.50 per cent. Furthermore, the current budget proposes to provide tax exemptions for companies that are engaged in the manufacturing of automated vehicles, three- and four-wheelers, home and kitchen appliances, and engineering products as long as certain conditions are met.

There is also a five-year extension for the exemption from VAT for makers of motor vehicles, sending a very good message to the automobile industry that would like to assemble or manufacture locally.

The finance minister also proposed a 10-year tax exemption for certain IT hardware manufacturers as long as they are produced in Bangladesh. The term "Made in Bangladesh" has been a key focus of the budget with the intention of boosting local manufacturing and discouraging imported products.

These rate cuts and exemptions are a welcome follow-up from the previous year's finance bill, which also extended similar tax cuts to business enterprises. The cuts are certainly highly welcome by the corporate sector and the cash-rich potential investors, especially foreign ones.

These cuts come at a time when Bangladesh is experiencing price stability, moderate levels of exports, high inward remittance, record-high foreign reserves, and stable exchange rates. Therefore, these corporate tax rate cuts and exemptions are well-timed and are expected to further boost the economy during a period when the Covid-19 pandemic had slowed it down compared to the pre-pandemic days when the economy was moving ahead.

A significant point to note regarding the current budget is that it also seems socially progressive and inclusive. There is also a special tax exemption, which will be available for SMEs owned by women entrepreneurs with the primary goal of encouraging and motivating more females to become involved in business ventures.

Additionally, the enactment of special tax incentives has also been proposed in the budget to increase work opportunities for transgender employees.

The new budget proposes to put forth the necessary provision in the country's tax ordinance whereby there would be a rebate of 75 per cent of the total salary paid to employees from the third gender or 5 per cent of tax payable, whichever is lower.

Such a rebate would be available to employers who employ at least 10 per cent of their total workforce or have higher than 100 workers from the third gender. However, it remains to be seen what would happen with respect to the companies whose tax liability is dominated by advance income tax. Such inclusionary fiscal policies will certainly put Bangladesh on a praiseworthy list of progressive nations.

Prima facie, while the budget seems to be focusing on supplying more liquidity to the market through lower tax on the businessmen and entrepreneurs, a further upward adjustment on the minimum taxable income for individuals would have helped this vision a lot.

The author is a partner at PwC Bangladesh. Views are personal.