Senior Correspondent ; Dhaka — In a major bid to revitalize stagnant private investment, the government is planning to slash withholding tax rates and keep corporate tax structures stable for the next five years in the upcoming national budget for Fiscal Year 2026-27.
Concurrently, the National Board of Revenue (NBR) is moving forward with plans to hike duties and taxes on luxury items and import-dependent goods to shield local industries and shore up state revenue, according to multiple NBR sources.
Tax Caps Tied to Banking Transactions
Under the new fiscal proposals, existing tax incentives for publicly listed companies will remain intact. Companies listed on the stock market via Initial Public Offerings (IPOs) or direct listing—that offload at least 10% of their paid-up capital—will face a 22.5% tax rate.
This rate will drop further to 20% if all corporate financial transactions are funneled through formal banking channels.
For non-listed companies, the standard tax rate will be maintained at 27.5%, but will be slashed to 25% for compliance with cashless banking channel practices.
NBR officials believe a predictable, five-year tax policy window will provide entrepreneurs the clarity needed for long-term capital investments. Automation and transparency overhauls are also being introduced for the tax audit selection and withholding tax verification pipelines.
Long-Awaited Relief on Advance Taxes
Addressing a core grievance from the country’s business community, the NBR plans to scrap provisions that treat withholding tax as a minimum final tax liability. Under the current regime, companies facing net losses struggle with bureaucratic delays trying to claim refunds for taxes cut at the source.
The FY27 budget aligns with international best practices by treating source-deducted taxes as adjustable advance taxes, smoothing out the tax refund pipeline.
Key sectoral withholding tax cuts under review include:
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Export Cash Incentives: Dropping from 10% to 5%.
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Bulk Power Purchase: Dropping from 6% to 4% for state purchases from power generation plants.
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Fuel Oil Supply: Dropping from 1.5% to 1%.
Commenting on the development, Mohammad Hatem, President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), stated, “Cutting withholding tax has been our long-standing demand. To drive investment, entrepreneurs must be freed from these complex regulatory bottlenecks.”
Countering Inflation and Driving Import Substitution
To cushion consumers from inflationary pressures, the NBR plans to lower the withholding tax rate to a nominal 0.5% on roughly 60 essential consumer commodities, including rice, paddy, wheat, edible oil, potatoes, onions, garlic, ginger, salt, and sugar.
Furthermore, advance taxes on imported kidney dialysis filters will be completely waived, alongside tax cuts on medical aid items used by persons with disabilities.
To curb import dependence, domestic edible oil processors crush-manufacturing from local oilseeds are projected to receive a lucrative 10-year tax holiday.
Luxury Goods and Cigarettes to Cost More
To balance the revenue ledger and defend domestic output, higher tariffs will hit cigarettes, nicotine products, imported cashews, foreign fish, cosmetics, alcohol, and gourmet luxury foodstuffs.
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Tobacco: The retail price of a premium 10-stick cigarette pack is proposed to rise from 185 Taka to 210 Taka, accompanied by higher supplementary duties on raw tobacco and nicotine extracts.
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Cashews & Commodities: Import duties on processed cashew nuts will spike sharply from 5% to 25% to insulate local growers.
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Infrastructure: Mild Steel (MS) rods—the backbone of the domestic construction industry—are also under consideration for additional tax levies, a move real estate insiders warn could escalate overall housing and public infrastructure development costs.