The Foreign Investors Chamber of Commerce and Industry (FICCI) said that despite having some positive aspects, there are also some concerns regarding several provisions that could potentially impede business growth and increase the burden on compliant taxpayers.
In its initial reaction on proposed national budget of financial year 2025-26 on Monday, the chamber stated that the ordinance demonstrates a commitment to easing the burden on specific sectors and promoting a more predictable tax system.
TIM Nurul Kabir, executive director of the FICCI, stated that the reduction of the source tax for construction companies and essential goods is a pragmatic move that would offer good relief to these vital industries.
Furthermore, the non-consideration of dividends received from a joint venture by a JV partner for tax purposes is a sensible approach, avoiding double taxation on profits already taxed at the JV level.
However, a significant concern lies with publicly traded companies that have less than 10 per cent of their shares issued through an IPO, as they are slated to face an additional 7.5 per cent corporate tax.
The impact of this tax at a significantly increased rate appears to be discriminatory.
Equally concerning is that the benefit of a reduced tax rate that was available for companies for transactions conducted through banking channels has also been withdrawn.
This is a counter-productive measure to the nation's efforts to establish a cashless society that places Bangladesh at a disadvantage position compared with Vietnam and Indonesia.
While the increase in the tax-exempt income threshold at the entry level is a positive step, the overall changes introduced in the tax structure are likely to impose an additional burden on middle-income earners when viewed in totality.
The new 7.5 per cent advance tax (AT) on commercial importers — with no further VAT if local value addition is under 50 per cent — simplifies settlement and reduces refund claims, but this might escalate the cost if value addition is lower.
Extending the rebate and refund period from four to six months will also benefit businesses navigating working capital constraints, he hailed.
VAT on online sales has been raised from 5 per cent to 15 per cent, which will make it difficult for the online business industry to survive, he feared.
However, several amendments have been proposed to make the Customs Act, 2023 more modern and effective.
Moreover, penalties for violations of import control regulations and errors in cargo declarations have been reduced, which will simplify the import process.
