Govt to unveil 5-yr corporate tax roadmap, with rates unchanged

The government is set to announce corporate tax rates for the next five years, offering the long-term policy certainty businesses and investors have long sought for.

Tax rates, however, are unlikely to increase. Finance ministry officials familiar with the matter say the government plans to keep rates unchanged until fiscal year 2030-31.

Finance Minister Amir Khosru Mahmud Chowdhury is expected to go further in his first national budget, due on June 11, by introducing a broader three-year predictable tax framework, extending beyond the two years already announced by the interim government.

Prime Minister Tarique Rahman approved the proposal in principle on May 14 during a high-level meeting at the Secretariat, according to finance ministry officials who attended.

Under the proposed roadmap, listed companies would pay a corporate tax rate of 22.5 percent, while non-listed firms would be taxed at 27.5 percent. Both categories could qualify for reduced rates of 20 percent and 25 percent, respectively, if all income is channelled through banking transactions.

One Person Companies (OPCs) are likely to face a tax rate of 27.5 percent. Banks, insurance companies and other financial institutions would pay 37.5 percent if listed and 40 percent if non-listed.

Mobile operators are likely to be taxed at a flat 45 percent, while private universities and colleges could benefit from a reduced rate of 10 percent. Tobacco products and cigarettes would remain subject to a 45 percent tax plus a 2.5 percent surcharge.

“There will be an indication in the budget to reduce corporate tax gradually as the government looks to expand its coverage,” a senior finance ministry official said, requesting anonymity.

The official added that companies currently paying the highest rates are likely to see gradual reductions in the coming years.

In fiscal year 2021-22, the corporate tax rate for non-listed companies was reduced to 30 percent from 32.5 percent, while the rate for listed firms was cut to 22.5 percent from 25 percent.

Rupali Chowdhury, president of the Foreign Investors’ Chamber of Commerce and Industry (FICCI), welcomed the move, saying policy predictability is essential for business planning and investment decisions.

“We like predictability very much. Predictability is good. Businesses need certainty to make long-term investment decisions,” said Chowdhury.

She argued that recent increases in supplementary duties have offset the benefits of lower corporate tax rates.

“Corporate tax is imposed on profits, but supplementary duty is imposed on revenue. On one hand, the tax rate is being reduced, but on the other hand, the government is taking back more through higher supplementary duties,” she said.

Chowdhury said businesses often have little choice but to pass the additional costs on to consumers, contributing to inflation and raising operating costs.

She also expressed concern that compliant companies bear a disproportionate share of the tax burden while non-compliant firms continue to evade taxes, undermining fair competition and reducing government revenue.

Snehasish Barua, managing director of SMAC Advisory Services, said the roadmap would provide much-needed certainty but warned against locking in tax rates for an extended period.

“Globally, corporate tax rates are falling. Locking Bangladesh’s private company tax rate at 27.5 percent until assessment year 2030-31 risks severely damaging our competitiveness against regional peers such as Vietnam and Indonesia,” he said.

He noted that international practice usually limits such policy commitments to two or three years.

Barua said maintaining relatively high corporate tax rates over the long term could discourage private investment at a time when Bangladesh needs stronger economic growth and job creation.

“If the government’s ultimate goal is to create employment, it must rethink locking in uncompetitive long-term rates and instead design an agile fiscal strategy that stimulates domestic investment and robust job growth,” he added.

Masrur Reaz, chairman of Policy Exchange Bangladesh, also welcomed the proposal, saying it addresses longstanding concerns about policy inconsistency. However, he said Bangladesh’s corporate tax rates and overall tax burden are high compared with regional competitors such as Vietnam, Indonesia, Thailand and India.

“This is the first positive step, but the next important step should be rationalising the corporate tax rate, which is still quite high compared to comparable economies,” he said.

He added that advance income tax and other mechanisms increase the effective tax burden beyond the headline rate. “While predictability is welcome, the next step must be rationalisation of tax rates to improve competitiveness,” he said.