The House has cleared the Finance Bill for FY20 with some tax-related changes backed by Prime Minister Sheikh Hasina.
Lawmakers passed the Bill after the prime minister made the recommendation on the proposed budget on Saturday (Jun 29).
For the first time in the country’s history, Prime Minister Hasina moved the Bill following a request from Finance Minister AHM Mustafa Kamal. The finance minister made the request as he was unable to move it due to his sickness.
On Jun 13, Kamal presented a Tk 5.23 trillion expenditure for fiscal 2019-20 in the parliament. The proposed budget is 18 percent higher that of the revised one for the outgoing 2018-19 fiscal.
A 15 percent tax on stock dividends was proposed for the FY20 in a bid to protect the investors’ interests.
“Some from the business community objected to it as the banks cannot issue cash dividends to raise their paid up capitals in line with the Bangladesh Bank rules,” the prime minister told parliament earlier taking part in the budget discussion.
Hasina proposed that companies offering stock dividend will also have offer equal amount of cash dividend for shareholders otherwise 10 percent tax will be imposed on stock dividend.
She also pitched for raising retail investors’ tax-free dividend income ceiling to Tk 50,000 from the proposed Tk 25,000.
Finance Minister Kamal had also proposed slapping a 15 percent tax on listed companies if its retained earnings and reserve exceed 50 percent of its paid-up capital.
“But the businesses raised their objection saying accumulated profit is usually invested in companies, its expansion and development while capital is needed for the expansion and reform of the local and foreign companies,” she said.
But she said paying profit to investors has to be there in mind.
Hasina said listed companies can transfer maximum 70 percent of the neat profit after tax for retained earnings and reserve. “A company has to give the rest of 30 percent as stock and cash dividends. If any company fails to do so, 10 percent tax will be imposed on the transferred retained earnings and reserve.”
She also recommended bringing some changes to VAT.
Businesses paying VAT lower than 15 percent rate will be able to claim rebate which was not proposed in the proposed budget unveiled earlier this month, said the prime minister.
In the budget, the government proposes imposition of 5 percent, 7.5 percent and 10 percent VAT on specific goods and services apart from the standard VAT rate of 15 percent. In addition, it wants to impose specific tax on some services and products such as key construction material rod and newsprint. It has also suggested continuing the existing 2 percent and 2.4 percent VAT at the trading stage of petroleum and pharmaceuticals.
It also said businesses will not be able to avail themselves of input tax credit if they pay less than 15 percent VAT.
To protect the local handloom industry, the Hasina proposed imposing Tk 4 as VAT on per kilogram thread which was 5 percent in the proposed budget.
She also said the government will bring logical changes to import duties on papers that are not produced in the country.
After Finance Minister Kamal accepted all the recommendations made by the prime minister, the Finance Bill for FY20 was unanimously passed in parliament.
Hasina moved the Finance Bill in parliament on behalf of the finance minister as he is yet to recover from his illness, which had prompted her to take over the budget presentation from Kamal on Jun 13.