September 22, 2022
Direct taxes must be doubled fastly

Direct taxes must be doubled fastly

Direct taxes must be doubled fastly

Bangladesh is becoming a developing country in 2026. Due to this, multifaceted challenges will arise. Bangladesh is becoming a developing country in November 2026 after leaving the list of least developed countries (LDC). Through this, the status in the global environment will increase by one step, but this incident will have a major impact on the country’s business and trade and import-export activities. It will also reduce the revenue of the government. Because, as an LDC, Bangladesh has been receiving tariff benefits from the outside world for so long, they will not be there after 2026.

As soon as Bangladesh becomes a developing country, it has to comply with the rules and regulations of the World Trade Organization (WTO). There will be many challenges in this.

The transition from LDC is happening at a time when Bangladesh is becoming not only a developing country but also a middle income country. On the one hand, revenue and export earnings will decrease, while on the other hand, the interest cost of foreign loans will increase.

  • A National Committee headed by Chief Secretary to the Prime Minister Ahmed Kaykaus was formed in April 2021 to prepare and plan and implement and monitor the potential challenges arising from the transition from LDCs. The challenges have emerged in three reports submitted to the committee.
  • According to the tax report, the tax collection in the country is low compared to the Gross Domestic Product (GDP). The ratio of direct tax to indirect tax is 35:65. It should be 70:30 soon. It is said that Bangladesh should now pay more attention to direct tax collection.
  • According to a report, Free Trade Agreements (FTAs) and Preferential Trade Agreements (PTAs) should be made with various countries to increase exports.
  • Meanwhile, a report published by the WTO said that after becoming a developing country, products will have to be exported with additional duties. As a result, the annual export income of Bangladesh may decrease by 537 million dollars or 51 thousand crore taka.

No more cash assistance
According to a report by the National Committee, Bangladesh currently provides export incentives or cash assistance for 43 products. After 2026 it can no longer be given. Then it will not be able to give subsidy to the export of agricultural products.

Farooq Hasan, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said, “Challenges are coming, that’s right. We are also preparing to fight. Government support is needed for competitiveness.

I want reform of NBR
According to the tax report, the scope of income tax and Musak should be increased. All individuals and organizations engaged in various taxable professions should be brought under Income Tax and Musak. A strategy should be found to increase the revenue by reducing the tax rate. All in all, structural reform of NBR is needed.

Currently, 34 percent of revenue is collected through import duties. The report recommends reducing this rate to 24 percent in the current fiscal year 2022-23, 22 percent in the fiscal year 2023-24, 20 percent in the fiscal year 2024-25 and 18 percent in the fiscal year 2025-26. However,

there is a lack of preparation in implementing the recommendations, according to NBR sources.

Direct taxes must be doubled fastly

Recommendations for tariff rationalization

According to another report, Bangladesh should reduce all types of tariffs to a reasonable level in accordance with the regulations of the World Customs Organization and WTO. For this the revenue income will decrease a lot.

The report also states that the country currently has a practice of fixing minimum import prices, which is not in line with WTO rules. For that, it has been recommended to lift the minimum import price from 35 products in the current financial year, 22 products in the financial year 2023-24 and 127 products in the financial year 2024-25.

Mostafizur Rahman, a special fellow of the Center for Policy Dialogue (CPD), told Prothom Alo, “The transition from LDC is taking place at a time when Bangladesh is becoming not only a developing country, but also a middle-income country. On the one hand, the revenue income and export income will decrease, on the other hand, the interest cost of foreign loans will increase.

Mostafizur Rahman believes that Bangladesh should now move towards increasing bilateral trade facilities through negotiations. He said, Bangladesh has to prepare with three characters. These are LDCs, post-LDCs and developing countries. Even though it is developing, Bangladesh should continue its efforts so that the benefits of LDC continue for 6 to 9 years.