Govt likely to announce tax rates in advance

The government is likely to announce income tax rates for individuals and companies in advance in order to allow them to make better investment and tax plans.

Currently, the National Board of Revenue (NBR) announces tax rates for firms and individuals after the end of an income year.

For instance, the current income year begins from July 2023 and will end on June 2024.

Based on the announced rates, taxpayers file their income and wealth statements and pay taxes on their incomes in the next year, termed as the assessment year.

But in the coming year, the NBR may announce tax rates that will not only be applicable for the outgoing income year 2023-24 but also for the next income year 2024-25.

In effect, this will allow individuals to know the income tax rate prior to the start of income year 2024-25 and pay the tax once the year ends in June 2025.

In response to longstanding demands of taxpayers, the NBR is expected to bring about the new system to replace the existing "retrospective system", a finance ministry official, requesting anonymity, told The Daily Star yesterday.

A retrospective tax is a tax imposed on a transaction or deal that was conducted in the past.

"In the next budget for fiscal year 2024-25, the NBR is planning to move to a new system, which is also called the prospective tax system. We are working on it," the official said.

This system will help build confidence of individuals and investors and they can pre-plan their tax management and investment plan, he added.

On May 14, Prime Minister Sheikh Hasina also gave the nod to this proposal and it might be integrated into the next finance act, the official said.

Investors and tax analysts welcomed the NBR's move, saying it would boost investor confidence and encourage local and foreign investment.

"It will have a positive impact on the domestic and foreign investment," said Md Humayun Kabir, chairman of a taxation and corporate law committee at the Institute of Chartered Accountants of Bangladesh (ICAB).

Not only investors, but also individuals will benefit from the move as they will be able to take decisions about their businesses or personal finances in advance, he added.

Therefore, the new system should be continued to grow confidence of investors, he said.

Kabir also mentioned that the government once implemented this system at least two decades ago. "But it was discontinued after two years," he said.

Kamran T Rahman, president of the Metropolitan Chamber of Commerce and Industry, also welcomed the move.

"Investors will receive a positive signal. A stable tax environment will increase their confidence," he said.

In Bangladesh, there are over one crore people who have taxpayer identification numbers.

In 2022-23, taxpayers submitted 41 lakh returns, which represented a year-on-year increase of 17 percent.

Meanwhile, some 35,976 companies filed returns, up 6 percent year-on-year, according to NBR data.