The National Board of Revenue on Monday released a new tax expenditure policy with a provision of giving maximum five years of tax exemption to a company or an industry.
The policy titled 鈥楾ax Expenditure and Management Framework鈥� also made it clear that the tax exemption would not be extended beyond five years even if the goal of the facility was not met.
Tax expenditures are government revenue losses from tax exclusion, exemption, deduction, credit, deferral, and preferential tax rates.
In the 2021-2022 financial year, the NBR estimated a tax expenditure of Tk聽1,15,056 crore in direct taxes only, which was higher than the total direct tax collection in that financial year, amounting to Tk聽1,02,337 crore.
The country has facing ignominy for being one of lowest tax-GDP ratio countries.
According to the framework, the tax exemption can only be provided by parliament.
In absence of parliament, the president will exercise the jurisdiction, said the framework.
However, for the greater interest of public (daily essentials and state-interest), the finance minister or the finance adviser can provide tax exception by the approval from the cabinet or advisory council.
The framework, which will come into effect on July 1, suggested that the finance ministry submit a report on tax exemption facility already given to the companies and industries without any specific deadline to parliament by June 30, 2026, seeking approval for cancellation, extension and modification.
In October 2024, the NBR issued a gazette, reinstating a five-year tax exemption to Grameen Bank founded by Nobel laureate Professor Muhammad Yunus, now the chief adviser to the interim government.
According to the framework, the finance ministry will submit an annual report on tax expenditure to parliament.
The main aims of the framework are ensuring accountability in decision making and monitoring of tax expenditure.
It is expected that the proper implementation of the policy would help in revenue mobilisation as well removing discrepancies in tax collection.
The task force report on 鈥楻e-strategising the economy and mobilising resources for equitable and sustainable development鈥� made a dozen of recommendations to enhance revenue mobilisation.
One of the recommendations was the rationalisation of tax expenditures.
鈥業t is necessary to abolish all exemptions and allowances and/or minimise them in special cases and undertake studies to examine the impact of tax holidays and other incentive measures and explore relative advantages of alternative options (a uniform reduced tax rate) and introduce appropriate changes. Abolish the exemptions of tax in respect of capital gains and, in deserving cases, these may be taxed at preferential rates,鈥� according to the report.
