The heavy reliance on indirect taxation has been treated as one of the main obstacles in

attaining economic progress in developing countries. The problem arises mainly due to
the fact that only a few taxpayers share the burden of taxes. Bangladesh is no exception
which is also trying to reform its tax structure for long time through structural adjustment
and growing demands have been placed on it to suggest towards a desirable tax system. A
huge segment of the population living in acute poverty and disparity is also evident in
income distribution. Tax burden is ultimately shared by a limited number of individual
taxpayers and corporations. Thus attaining a broad based and optimal taxation system is a
much desirable task for the government. This study tries to keep forward such an
endeavor by analyzing the distribution of burden of income taxation in Bangladesh.

Who is entitled to a Tax Holiday?

Tax holiday is allowed to industries subject to the relevant rules and procedures set by the National Board of
Revenue (NBR) for the following period according to the location of the establishment.
In Dhaka and Chittagong Divisions (excluding 3 hill districts): 5 years. In other divisions (including 3 hill districts
of Chittagong Division): 7 years.
The period of such tax holiday will be calculated from the month of commencement of commercial production.
The eligibility of tax holiday to be determined by the NBR and the time of the commencement of commercial
production is certified by the respective sponsoring agencies. The industrial establishment should be registered
under the companies Act. 1994.
Tax holiday facility can be availed by industries coming into commercial production within 30 June 2000 A.D.
FIRST PAGE

Muhith, JS body wide apart over tax holiday

scheme
Thursday June 10 2010

Finance Minister AMA Muhith reiterated Wednesday his stance on

discontinuation of the tax holiday facility while a parliamentary
standing committee came up with a suggestion to continue it.

Mr. Muhith was opposed to continuation of the facility saying it is

mostly being misused.

"Whoever says what, I personally believe that the tax holiday should
not be continued," he told journalists emerging from an inter-
ministerial meeting on social safety-net programmes at his secretariat
office in Dhaka.

"Now, the cabinet will decide on the issue," the minister replied to a
question saying the industries already enjoying the tax-holiday facility
will continue until the time set earlier.

On the other hand, the parliamentary standing committee on finance

ministry recommended on the day that the tax holiday scheme should
continue as it would help create more jobs, AHM Mustafa Kamal,
chairman of the committee, said.

The debate on tax-holiday issue began Tuesday when the chairman of

the parliamentary standing committee on finance ministry, AHM
Mostafa Kamal, criticised the finance minister's comment on
discontinuation of the tax benefit facilities in the next budget.

Mr. Mostafa Kamal Tuesday in a meeting said the finance minister's

announcement on the discontinuation of new tax-holiday from next
fiscal year was "irresponsible".

The finance minister in support of his stance Wednesday told

journalists that industries reported earning profits as long as they
enjoyed the facility.

"But when the tax holiday ends, they report losses and eventually shut
their manufacturing units down," he commented.

"The parliamentary committee can make any recommendation on an

issue. (But) I don't think it is wise to continue the tax-holiday facility
that has long been misused," Muhith said in support of his statement
made on May 14.

The government currently offers tax-holiday to the newly set up

industries for five or seven years depending on the location of the
factories.

The manufacturing units in Dhaka and Chittagong divisions (excluding

hill-tract districts) will get the facility for five years and in Rajshahi,
Khulna, Sylhet, Barisal divisions and three hill districts in greater
Chittagong for seven years from the month of starting their
commercial production.

Elaborating on the discussions he had on Wednesday the finance

minister said the government would increase the budgetary allocation
for social safety-net, employment generation and food-security
schemes.

He said the 100-day employment generation programme, designed for

helping the unemployed rural poor during the lean period, would also
be restructured with an increased allocation.

"We will raise the allocation significantly for those three areas as we
have pledged them in our election manifesto."

Replying to another question, Mr. Muhith said the draft national budget
for next fiscal that will be announced on June 11 in parliament is
almost ready.

State ministers for of social welfare Enamul Haq Mostafa Shaheed and
liberation war affairs ABM Tajul Islam, secretaries of the finance
division, social welfare ministry, liberation war affairs ministry and
women affairs ministry were present at the inter-ministerial meeting.

On the other hand, while talking to journalists after the Jatiya Sangsad
(JS) committee meeting on the day, Mr Mustafa said, "Industries in
priority sectors like agriculture and information technology and under-
developed areas should come under the purview of the tax holiday
facility."

Mr Mustafa was quoted as saying at a pre-budget discussion earlier

Tuesday that the announcement on no more new tax holiday was
irresponsible.

Mr Mustafa, however, claimed Wednesday that he did not make any

such comment.

The standing committee chairman said the committee in the meeting

discussed the budgetary framework and put forward some
recommendations on budget size, revenue collection and expenditure.

"In Bangladesh the budget size ranges from 15 percent to 17 percent

of the gross domestic product (GDP) and the next budget will be 16.5
percent of the GDP," he said.

The expected GDP size of the current fiscal is Tk 6,180 billion and the
next fiscal's projected GDP size is Tk 6,860 billion, he added.
The committee recommended that the National Board of Revenue
should expand its network to upazila level and encourage rural people
to pay taxes, said Mr Mustafa.

"There are many shops in union and upazila levels and Tk 1,000 to Tk
2,000 can be collected in tax every year from each shop," he said.

The NBR should recruit more tax collectors to work at upazilas and
unions, he added.

The minimum taxable income limit should be raised to Tk 200

thousand from the present level of Tk 165 thousand, said a Parliament
Secretariat press statement released after the meeting.

Mr Mustafa said the government should lower the income tax rate and
widen the tax base to collect more revenue.
http://www.nbr-bd.org/incometax.html

The Awami League-led government is going to present its first budget for 2009-10 fiscal
today with an expected annual outlay of nearly Tk 114,000 crore incorporating some of
the party’s pre-polls pledges into budgetary measures.

This will be the first national budget by an elected government after the military-
controlled interim government had prepared two budgets between 2007 and 2008.
The national budget for 2009-10 which the finance minister, AMA Muhith, is scheduled
to place in parliament this afternoon is likely to depend heavily on borrowings to meet
‘ambitious’ expenditures against stagnant revenue incomes. Muhit authored his first
budget in 1982-83 when he was finance minister under the martial law regime of Lt
General H M Ershad.
However, finance ministry sources said, the gap between the government’s income and
expenditure, technically called budget deficit, is likely to be, for the first time, as high as
5 per cent of the gross domestic product which is estimated to be nearly Tk 6,86,730
crore or US$ 98.1 billion the next fiscal year.
Domestic and foreign borrowings together are shown in the draft budget at Tk 34,358
crore which is slightly over 30 per cent of the total outlay [Tk 113 819 crore] — quite an
expansionary budget that the finance minister has already authored to accommodate the
AL election manifesto as well as measures to address the global recession.
In view of urgent needs for increasing both public and private investments, a new head
styled Public-Private Partnership with an allocation of Tk 2,100 crore is likely to be
added to the new national budget, which, officials said, is aimed at attracting higher
private investments alongside public sector spending in critical sectors like power,
infrastructures and human resources development.
The finance minister is likely to raise the total development expenditure to Tk 33,059
crore, inclusive of already finalised outlay of annual development programme worth Tk
30,500 crore, from the revised figure of Tk 24,712 crore in the current fiscal, despite the
government’s failure to implement the budget time and again.
Muhith is likely to propose in parliament a projected revenue receipt of Tk 79,461 crore
for 2009-10, as against the current year’s estimated revenue earning of Tk 69,180 crore,
making only 14.86 per cent increase.
Faced with a compulsion to generate domestic demands for coping with the fallouts of
the current recession, the finance minister will relay on a number of sources for deficit
financing. The government is likely to borrow Tk 16,755 crore from banking sources at
home and a net amount of Tk 8,573 crore in foreign loans.
A projected amount of Tk 23,570 crore will be spent on proposed pay hike for public
servants and Tk 18,208 crore on employment generation and poverty alleviation schemes
and social safety net programmes.
An amount of Tk 10,080 crore is likely to be earmarked to meet various kinds of
subsidies for agriculture, food, petroleum, power and exports.
In the new budget, the government will have to bear a load of an aggregated amount of
Tk 15,808 crore for payment of interests on loans — Tk 14,471 crore for domestic loans
and Tk 1,337 crore for foreign debts. The percentage of interest payment in proportion to
the draft budget outlay stands at 13.88, compared to 12.6 per cent in the outgoing fiscal.
The combined allocation for two key sectors — health and education — is set to be
around 21 per cent in the total budget, as against 19.2 per cent in the current fiscal.
In an apparent move to keep fiscal option to meet unexpected expenditure in a year of
political transition and economic recession, the government has already kept an amount
of Tk 1,500 crore as controversial block allocation under unidentified projects in the next
annual development programme, which will be a part of the annual budget with its
passage by the parliament on June 30.
The finance minister, who had projected a revenue target of only Tk 2,170 crore in his
first budget amounting to Tk 4,738 crore way back in 1982-83, is expected to bring no
major changes in income tax rates for the taxpayers in the coming fiscal.
In a rather populist approach, he is set to announce measures such as continuation of tax
holiday and provision for whitening black money.
Retaining the lowest income tax exemption limit to Tk 1,65,000, the finance minister is
expected to focus in the next fiscal year on widening existing income tax base by
including additional 3,00,000 new taxpayers into the tax net.
Muhith is going to deliver a long budget speech, much longer than the two delivered by
former finance adviser AB Mirza Azizul Islam, as the text is set to be almost double.