While hiking value-added tax (VAT) on 43 goods and services, the National Board of Revenue (NBR) is also focusing on widening income tax coverage by phasing out exemptions to raise the tax to GDP ratio.

"Along with the VAT, various steps are being taken to increase the tax base in the case of income tax," the NBR said in a statement on Saturday night.

As a part of ongoing efforts to phase out the practice of providing income tax exemptions, several provisions have already been repealed or amended, the statement said.

"Additional measures are currently underway," it added.

On top of that, the tax administration is now reviewing plans to phase out existing exemptions for poultry farming, hatcheries and processors, including breeders, and feed millers.

"Along with the VAT, various steps are being taken to increase the tax base in the case of income tax," NBR said in a statement

Currently, the first Tk 10 lakh of income is tax-free, while a 5 percent tax applies to the next Tk 10 lakh. Incomes exceeding Tk 20 lakh but up to Tk 30 lakh are subject to a 10 percent tax rate.

Finally, a 15 percent tax rate is applied to incomes above Tk 30 lakh.

"We are yet to take any final decision. We are reviewing the issue," said an official of the NBR.

"If we want to raise the tax to GDP ratio, we have ultimately no option but to phase out the existing exemption. So, we are moving very carefully," he added.

In the current fiscal year, the NBR has estimated that tax exemptions would be worth Tk 163,000 crore, all aimed at easing the pressure on individuals and facilitate higher economic growth.

The estimated tax expenditure for FY25 is 11 percent higher from the roughly Tk 147,000 crore spent in fiscal year 2023-24, which accounted for 2.91 percent of the country's gross domestic product (GDP).

Last month, NBR Chairman Md Abdur Rahman Khan also said they already started to phase out the exemption, including removing power plants from the list.

For instance, the NBR has cancelled tax exemption facility for a power company owned by S Alam Group and also for foreign ocean-going ships in December.

Recently, the advisory council of the interim government has decided to raise VAT on 43 goods and services along with raising taxes on items like airfares, cigarettes, medicine, detergents, and soaps – an unprecedented move in Bangladesh in the middle of the fiscal year.

The VAT hike is being linked to conditions set by International Monetary Fund (IMF) for its ongoing $4.7 billion loan programme for Bangladesh.

Besides, the NBR is striving to increase government revenues by an additional Tk 12,000 crore.