Raising tax rates for high-income individuals without broadening the tax base could lead to unintended consequences, such as promoting illicit financial activities like money laundering and capital flight, according to the Metropolitan Chamber of Commerce and Industry (MCCI). During a recent budget proposal presentation for the fiscal year 2026-27 to the National Board of Revenue (NBR) in Dhaka, MCCI President Kamran T Rahman emphasized that increasing tax rates for high-income earners might discourage compliant taxpayers and elevate the risks of tax evasion and capital flight.
In the face of regional tax competition, maintaining reasonable tax rates is crucial. MCCI suggested that expanding the tax base, rather than simply raising tax rates, could be a more efficient and sustainable approach to enhancing revenue generation. The chamber stressed the importance of a rational and predictable tax system to attract investments and ensure adherence, especially in a region characterized by fierce tax competition.
To improve tax compliance, MCCI recommended widening the tax base to encompass more individuals and businesses, particularly those operating in the informal sector. Despite having over one crore registered taxpayers with electronic tax identification numbers (e-TINs), less than half regularly file tax returns, indicating systemic deficiencies.
One of the proposals put forward by MCCI was the introduction of a nominal minimum tax, ranging from Tk 100 to Tk 1,000 annually, coupled with a simplified one-page digital tax return filing system accessible through mobile apps. This initiative aims to entice new taxpayers into the formal tax system and foster a culture of compliance over time.
Highlighting concerns regarding the actual tax burden faced by businesses, MCCI pointed out that the cumulative impact of advance income tax (AIT), tax deducted at source (TDS), and other conditions could inflate the effective tax rate to as high as 40–50 percent, surpassing statutory rates significantly. These distortions diminish the benefits of nominal tax reductions and create disincentives for legitimate business activities.
MCCI urged policymakers to transition towards a streamlined, income-based tax regime, reduce complexities associated with corporate tax rates, and expedite digital integration across income tax, value-added tax (VAT), and customs systems. Furthermore, the chamber advocated for simplifying compliance procedures, rationalizing VAT rates, and ensuring swift, automated input tax credit processes.
For small and medium enterprises (SMEs), which play a vital role in employment and industrial development, MCCI proposed targeted tax reliefs, lower turnover taxes, and reduced duties on raw materials to bolster competitiveness. Emphasizing the need for a balanced revenue policy that promotes revenue generation while facilitating economic activities, MCCI cautioned against excessively aggressive taxation measures that could hinder growth in an already delicate economic landscape.