STAR BUSINESS REPORT

The government’s latest tax measures are likely to put further strain on businesses, as tax burdens have increased even though economic recovery remains sluggish, experts warned yesterday.

“When companies have to pay a 1 percent turnover tax despite making no profit, they essentially have to pay from their capital,” said Snehasish Barua, managing director of SMAC Advisory Services Ltd.

At a time when businesses are already struggling, if the capital begins to shrink, the company will not survive, he said.

“If the company doesn’t survive, neither will employment be generated, nor will the government receive any revenue,” he warned.

The tax on individual businesspeople has increased by 300 percent—from 0.25 percent to 1 percent. Since many individuals operate through companies, some of their tax burden will inevitably shift to the company, he said.

Barua was speaking at a press conference on the proposed national budget for fiscal year 2025-26, organised by the Institute of Chartered Accountants of Bangladesh (ICAB) at its head office in Dhaka.

He said listed companies with less than 10 percent of their shares in the stock market would now face a corporate tax rate of 27.25 percent, up from 22.5 percent.

This poses a legal problem. The law should be amended with provisions to benefit companies that offload 10 percent of their shares through follow-on public offerings (FPOs), repeat public offerings, or rights issues, he said.

He said that although the government has taken some measures to reduce the effective tax rate, the statutory tax rate has increased, and source deductions remain unchanged. Consequently, businesses will see little benefit, said Barua.

On top of that, the increase in personal income tax has employees worried, as their take-home income will decline, he said.