The minister also proposed further reduction of the tax rate for listed companies to 22.5% from 25%
Companies not listed with the bourses will now experience lower corporate tax rate, down to 30% from 32.5% in the upcoming fiscal 2020-2021.
The existing tax rate of 32.5% for companies applicable as one-person companies (OPCs) has been slashed down to 25% as well.
Finance Minister AHM Mustafa Kamal revealed this during his speech for the national budget on Thursday.
The minister also proposed further reduction of the tax rate for listed companies to 22.5% from 25%.
The tax cuts aim to boost business community morale and pave way for rapid growth of trade and commerce in the upcoming fiscal.
The minister also proposed to fix the rate of income tax for other entities at 30% instead of the rate applicable for individual taxpayers.
Rizwan Rahman, Dhaka Chamber of Commerce & Industry (DCCI), president, remarked it as a prodigious initiative, but added that a progressive reduction rate must be maintained for the next 3 years to boost business confidence.
Tax net will also go up when confidence is up, the business body leader noted.
Abul Kashem Khan, former president of the DCCI, said that businesspeople will be happy with the reduction in corporate tax rates.
“It has been demanded for a long time to lessen the corporate tax rates. The government has finally put it on paper,” he also said.
“Reducing corporate taxes will allow entrepreneurs to reinvest. As a result, job creation will increase,” he added.
Corporate tax means the organization pays on profits at the end of the year. This tax is currently collected at five levels in the country.
The maximum tax rate is 45% and the minimum is 25%.
Economists, including local industrialists, have long criticized that corporate tax rates are too high in Bangladesh. Their argument was that if the tax rate is reduced, the company's profit will be greater. As a result, there is an opportunity to reinvest some part of the profits.
If investment increases, there will be new employment opportunities. This will accelerate the growth of overall GDP.