Bangladesh is set to scale back several key tax proposals in its final FY2026–27 budget, as authorities respond to strong pushback from businesses, banks and industry groups ahead of parliamentary approval.
The recalibrated national budget is scheduled for passage by Tuesday, just ahead of the new fiscal year beginning 1 July.
Officials said the core fiscal framework of Tk9.38 lakh crore, along with the deficit path and macroeconomic targets, is likely to remain unchanged despite multiple policy revisions.
A major reversal is expected on a proposal to make Tax Identification Number (TIN) mandatory for opening bank accounts. The measure, originally aimed at expanding the tax base and improving financial oversight, faced criticism over risks to financial inclusion and administrative burden. Officials now say it is likely to be dropped.
A similar rollback is expected on the proposed package VAT system for small businesses, which drew opposition from retailers and SME groups over compliance costs and operational complexity.
Authorities are also likely to withdraw or significantly revise a proposal allowing legalisation of undisclosed income in real estate, following concerns over governance standards and public backlash.
On corporate taxation, a plan to replace the existing 20 per cent flat tax on listed company dividends with standard corporate income tax rates is expected to be scrapped.
Under the original proposal, dividend taxation could have risen to as high as 45 per cent in some sectors, compared to the current 27.5 per cent for most private firms.
The existing 20 per cent regime is now set to continue.
Income tax threshold likely to rise
The government is also considering a higher tax-free income threshold. The exemption limit is now likely to be set at Tk4 lakh, up from the proposed Tk3.75 lakh and the current Tk3.5 lakh.
Officials said the threshold may continue to increase by Tk25,000 from the initially proposed limits for the subsequent years, reflecting gradual income tax relief adjustments.
Also, the readymade garment sector may receive relief through a reduction in withholding tax on export proceeds from 1 per cent to 0.65 per cent.
The proposed 1 per cent source tax on subcontracting payments is also likely to be withdrawn.
A proposed increase in import duty on PVC and PET resin from 5 per cent to 10 per cent. The change, intended to support local producers, faced opposition from manufacturers who say domestic supply meets only about 30 per cent of demand and that higher duties would raise production costs.
The proposed supplementary duty of up to 350 per cent on cigarette filter components and nicotine pouches is also being reconsidered, along with higher duties on raw cashew nut imports used in agro-processing.
In financial taxation, authorities are weighing a cut in capital gains tax on gold to 5 per cent from 15 per cent. The earlier proposal had brought gold and jewellery gains under the broader capital gains framework covering securities, bonds and sukuk.
The income tax rate for private universities is also expected to be reduced to 5 per cent from 10 per cent, easing pressure on the higher education sector.
Officials said further adjustments remained under discussion, including withholding tax changes in selected sectors, clarification of startup incentives and continuation of export-oriented exemptions.
