The International Monetary Fund (IMF) has urged the National Board of Revenue (NBR) to implement a minimum 2% turnover tax across all business sectors to boost revenue generation.
During a meeting with NBR on Thursday, the visiting IMF team discussed the proposal with senior NBR officials, including Chairman Abdur Rahman Khan.
Sources from the meeting revealed that NBR officials raised concerns about the implications of raising the minimum turnover tax, saying it would put additional financial pressure on businesses.
They highlighted that businesses are already facing significant challenges, and an increase in turnover tax could raise their costs and losses for many, driving up product prices and exacerbating inflation.
The turnover tax was increased to 1% in July to meet IMF conditions.
NBR argued that a further increase to 2% would be unrealistic at this time, an NBR official told TIMES of Bangladesh after the meeting. He also added that such a decision would require consultation with the government and relevant stakeholders.
Currently, all sectors are subject to a 1% turnover tax, with telecom companies paying 1.5% and the tobacco sector paying 2%.
The minimum turnover tax, a form of indirect tax, is levied on businesses regardless of their profitability, which contradicts ideal tax policy principles.
NBR Chairman Abdur Rahman Khan acknowledged this in several statements. However, due to the absence of an ideal tax system, the burden of the minimum tax continues to be imposed.
In addition to the turnover tax proposal, the IMF recommended implementing a single identification number for both VAT and tax purposes. Currently, businesses must obtain a Business Identification Number (BIN) and individuals need a Taxpayer Identification Number (TIN).
The IMF’s proposal aims to streamline monitoring and supervision by using a single number for both, ensuring better data flow.
The IMF also emphasized the importance of digitization, recommending the implementation of electronic payments and filing for all transactions.
NBR has already moved towards this by making e-return filing mandatory. A project aimed at advancing digitalization within NBR has been approved by the Executive Committee of the National Economic Council (ECNEC).
Once implemented, the project is expected to significantly enhance NBR’s digital capabilities, according to NBR officials.
