The National Board of Revenue will unveil next month for stakeholders’ opinion the draft of the new Income Tax Act focusing on emerging international taxation issues including money laundering and profit shifting, and reducing corporate tax rates, officials said.
They said that the drafting committee had already finalised the structure of the law which is likely to be passed in parliament in July next year.
Digitisation of the country’s income tax system will be the main focus of the new law, they said, adding that emerging issues and new business dimensions like merger and acquisition, transfer pricing, money laundering and base erosion and profit shifting will also get attention.
Base erosion and profit shifting refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations, they said.
The new law will be in Bengali language with an official English version, said a senior official of the NBR.
He said that the revenue board was also set to hire two external experts, one for international taxation and another for drafting the law in Bengali.
‘There will be no major changes in the basic structure of the existing Income Tax Ordinance-1984 and more or less 80 per cent of the provisions will remain in place in the new law,’ he said.
Taxmen and taxpayers generally do not face any problems with the new law but the NBR has decided to frame the new law to incorporate the taxation issues that emerged in domestic and international arena and bring necessary changes to make the law fit in the country’s socioeconomic context, he said.
The NBR also cannot reduce the tax rates, particularly corporate one, due to the prevailing weaknesses in the country’s tax system, he added.
Under the existing law, the tax authority can allow tax exemption to any one through issuing statutory regulatory order which is the main hindrance to reduce the tax rates as tax exemption increases burden on regular taxpayers, officials said.
The method of allowing tax exemption will be modified in the new law and the NBR may scrap its authority to give exemption through issuing SROs, they said.
Tax exemption will be given with the approval of the parliament only, they hinted.
Earlier in March, the revenue board sought opinion from stakeholders about the structure, philosophy and text of the new law in a bid to prepare the draft.
The drafting committee is now working to frame the draft within August and make the draft available by next month, a member of the drafting committee recently told New Age.
Income tax wing of the NBR has also made major changes in some areas through finance acts in last three years, he said.
He said that the existing income tax returns submission system would also remain unchanged.
Earlier in 2013, the International Finance Corporation prepared a draft Income Tax Code, containing income tax law, gift tax law and wealth tax law, for Bangladesh but the NBR scraped the code finding it too complex in the context of the country.