Govt moves to reduce corporate tax and scrap retail vat plan

The government is adopting a more flexible approach on corporate tax, with a possible 2.5 percent reduction for the next five fiscal years subject to certain conditions. 

The measure aims to attract domestic and foreign investment, boost industrial production, generate employment, and increase the tax-to-GDP ratio. 

Plans to impose VAT at the retail level are also being abandoned. 

Additionally, the government is set to drop the proposal in the budget that would have allowed the legalisation of undeclared money through payment of taxes based on the actual deed value of land and flats.

These changes are being introduced to the proposed budget at the last minute before the passage of the finance bill, following objections from various stakeholders and traders. 

Sources close to the Ministry of Finance and the National Board of Revenue (NBR) confirmed the developments.

Finance Minister Amir Khosru Mahmud Chowdhury presented the Finance Bill in Parliament on June 11 alongside the budget for the 2026-27 fiscal year. 

The final Finance Bill is expected to be passed today, Monday.

According to NBR sources, the government has placed strong emphasis on increasing investment and employment. Although the proposed budget did not include a corporate tax cut, the final version may incorporate a 2.5 percent reduction under specified conditions.

For listed companies with paid-up capital below 10 percent, the current tax rate stands at 20 percent for those maintaining cashless or bank transactions, while the rate for others is being reduced from 25 percent to 22.5 percent subject to conditions. 

Other corporate tax rates remain unchanged: 22.5 percent for listed companies with paid-up capital above 10 percent, 20 percent for those issuing shares over 10 percent of paid-up capital, 27.5 percent for general companies, 37.5 percent for listed banks, insurance, and financial institutions, 40 percent for unlisted banks, insurance, and financial institutions, 45 percent for tobacco manufacturing companies, 40 percent for listed mobile operators, 45 percent for unlisted mobile operators, 27.5 percent for trusts, associations, and firms, 20 percent for cooperative societies, and 10 percent for private universities.

The government is also withdrawing the conditional provision to whiten black money following widespread criticism. 

The Finance Minister had earlier announced plans to impose a specific tax on 16 retail businesses, including grocery stores, prompting strong opposition from traders’ associations such as the Bangladesh Shop Owners Association. It is now understood that the government will abandon the proposal to levy such taxes on retail traders.