New tax law will be beneficial thru comprehensive digitisation


09 June, 2023, 05:30 pm

Last modified: 09 June, 2023, 05:40 pm

Snehasish Barua. Picture: Collected

“>
Snehasish Barua. Picture: Collected

Snehasish Barua. Picture: Collected

We welcome the new Tax Act, 2023, presented in Parliament on Thursday (8 June). It aims to simplify the law, reduce arbitrary power, lower the cost of doing business, and align with international best practices.

The new Act, for the very first time, has been drafted in a pure Bengali version. All sources of income and deductions being covered in each chapter will enable the user to easily navigate respective sources of income and allowable deductions in one place.

Keeping in mind the cost of doing business in Bangladesh, the new tax law covers a comprehensive list of deductible business expenses as compared to current law and addresses conflicts with International Financial Reporting Standards (IFRS), especially treatment of foreign currency gain/loss, impairment loss, treatment of the Right to Use asset, gain on revaluation of an asset, investment property, contribution to Workers Profit Participation Fund (WPPF) etc. The income of certain special purpose vehicles is exempted. The number of withholding tax returns has been reduced from 29 to 12.

A number of measures have been taken to reduce arbitrary power like the transparency of the audit process.

The Act aligns with international best practices, introducing share-based payment, demerger-related provisions, thin capitalisation and General Anti Avoidance Rule (Gaar).

The simplified refund process will enhance trust in the tax system since tax refunds will be directly credited to an assessee’s bank account after processing the return. Consequently, the Act now provides a more comprehensive, fair, and internationally compliant framework for taxation.

Partnership firms, the Association of Persons (AOP), and funds with a turnover exceeding Tk2 crore are required to file audited financial statements. De-registration of eTIN and additional services under the Proof of Submission of Return (PSR) will enhance the tax net.

However, maintaining a higher rate of Tax Deducted at Source (TDS) will keep costs for businesses higher since most of the TDS is considered as minimum tax. Due to minimum tax, the taxpayers are burdened with excessive effective tax. On top of that, the sudden jump of the minimum tax on the sale of carbonated beverages by 830% is a huge blow for the industry to survive. The Act also restricts loss-making entities from setting off business losses with other income, potentially discouraging taxpayers.

Moreover, the sudden imposition of a limit on investment will limit the investment options. While investment in shares remains unaffected, introducing limits for mutual funds may discourage corporate investors.

I firmly believe such a progressive tax law will surely take Bangladesh to a new height provided the challenges mentioned above are well addressed.


Snehasish Barua is director of Smac Advisory Service Ltd





Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

Back To Top