NBR to draft new income tax act

The National Board of Revenue has decided to frame a fresh draft of income tax act as the tax authority found the proposed ‘direct tax code’ drafted by the International Finance Corporation too complex and inconsistent with the country’s socio-economic condition.
The direct tax code containing all the laws related to direct tax, including income tax law, gift tax law and wealth tax law, was supposed to come into force from the fiscal year 2016-2017 replacing the existing Income Tax Ordinance-1984.
Earlier, the IFC, the private sector lending arm of the World Bank Group, provided the revenue board with a draft of direct tax code that included international best practices in the field of direct taxes.
But the revenue board found that the IFC consultant drafted the code without considering the socio-economic context of the country and brought radical changes, completely restructuring the existing ordinance which has many best practices, officials of the income tax wing of the NBR said.
The draft is also too complex for both tax officials and taxpayers, they said.
Stakeholders also did not respond positively on implementation of the direct tax code during consultations and inter-ministerial meetings.
According to the NBR, the direct tax code incorporated a provision of taxing the companies on their gross asset, dividend, branch profit and net wealth, fixing a uniform corporate tax rate for companies, reducing the sources of income to only two from the existing seven, cutting the sectors of deducting tax at sources to only 15 from the current 54, withdrawal the provision of minimum tax for individual taxpayers, abolition of final settlement for source tax and limiting the scope of tax exemption facility.
Officials said that these changes might put a negative impact on implementation as well as revenue collection as these were not consistent with the existing practices.
The abolition of tax holiday which the government provides to encourage industrialisation and investment will create challenges for domestic industries, they said.
‘So, the NBR has decided to frame a fresh draft of income tax act to make the law consistent with the country’s prevailing context and easy to understand to both the taxmen and taxpayers,’ a high official of the income tax wing told New Age last week.
The fresh draft will be prepared by December this year and may come into effect from July 2017 after passing in parliament, he said.
It will not be possible to implement the new tax law from the original deadline of July 1, 2016 or first day of next fiscal year of 2016-2017 as drafting of the new act will take some time while the new Value-Added Tax and Supplementary Duty Act-2012 will also be enforced from the next fiscal year, he said.
It will not be wise for the NBR to go with implementation of two new major laws at a time, he added.
Officials said that the NBR had already formed three committees—advisory, monitoring and drafting implementation—for the new income tax act.
Another committee consisting of tax experts both from public and private sectors, former members of the NBR, legislative and technical experts, for drafting the law, will be formed soon, they said.
The drafting committee will consider the positive aspects of the existing income tax ordinance and the draft direct tax code to adopt international best practices while framing the new draft, they added.
The NBR does not want to bring massive structural changes in the new tax law, rather modernise it with automation and international best practices.
The new law will be bilingual—Bengali and English.
The government also wants to continue with the existing wealth surcharge system for a few more years instead of imposition of wealth tax right now, as imposition of wealth tax needs proper valuation of wealth in market price, officials said.
The NBR or any other government offices do not have capacity of conducting valuation activities while there is no valuation department in the country to enforce the wealth tax law, they added.
A separate gift tax law is also in place in the country, they said.

News Courtesy: www.newagebd.net