Bangladesh is reportedly considering a tax policy change to promote cashless transactions.

Listed companies on the capital market with less than 10% of their shares available for public trade will see their corporate tax rate increase from 22.5% to 25% unless they adopt cashless transactions.

This policy, expected to be announced in the upcoming budget on 6 June, 2024, aims to incentivise businesses to move away from cash-based transactions.

However, this change has drawn criticism. Some business leaders argue that most companies won’t be able to meet the cashless transaction requirement and that the policy creates opportunities for corruption. Others worry it will discourage new firms from entering the stock market.

Benefits with Conditions:

  • Listed companies with a higher public shareholding (over 10%) will see a slight tax rate increase from 20% to 22.5%.
  • Companies, both listed and non-listed, can maintain their current tax rates if they comply with the cashless transaction limit (BDT 3.6 million annually).
  • Non-listed companies, currently taxed at 27.5%, can enjoy a 2.5% tax reduction for adopting cashless transactions.
  • One-person companies can benefit from a similar tax reduction, bringing their rate down to 20%.

Concerns and Criticisms:

  • Capital market experts argue this policy discourages new firms from entering the stock market by narrowing the tax benefit between listed and non-listed companies (from 7.5% to 5%).
  • Business leaders express concern that most companies won’t be able to meet the cashless transaction requirement due to Bangladesh’s economic realities.
  • Some fear the policy creates opportunities for corruption, as tax officials have the authority to grant the conditional tax reductions.
  • Concerns exist that the BDT 3.6 million annual cash transaction limit may be impractical for large companies.
  • Dhaka Chamber of Commerce and Industry (DCCI) officials believe tax reductions shouldn’t be conditional and that transitioning government offices to cashless transactions would be a more effective way to promote the practice.