The National Board of Revenue (NBR) has announced plans to double the current tax rate for companies manufacturing motorcycles, refrigerators, air conditioners, and compressors, following a series of tax increases on more than 50 goods and services.
According to NBR sources, this proposed tax hike is expected to take effect in the fiscal year 2026.
At present, these industries are subjected to a 10% income tax rate and a 2% advance income tax (AIT) on imported machinery, parts, and equipment.
The tax regime was initially set to remain in effect until 2032.
However, sources within the NBR have indicated that the rate could be raised, with a new order possibly being issued this week, replacing the existing provision.
This potential tax increase comes on the heels of a VAT rate hike for electronics items, which has risen to 7.5% over the past two years.
Discussions are already underway to push the VAT rate to 15% in the upcoming national budget.
Officials from the NBR's Income Tax Department stated that any increase in AIT on imports would take effect immediately upon the issuance of the order.
NBR hinted at this change in a press release on 4 Jnauary, stating that steps are being taken to widen the tax net alongside VAT hikes.
Industry experts have expressed concern over the impact of the proposed tax increase, warning that it would exacerbate the financial pressure on the motorcycle, refrigerator, and air conditioner sectors.
This could result in higher prices, with the burden ultimately falling on consumers.
Industry insiders say that people's incomes are shrinking due to inflation - causing a decline in sales, any further tax increases will make the market even more contracted.
Some said investors were initially attracted to the market due to the long-term tax benefits and any sudden changes to these benefits would send a negative message to potential investors.
Tax experts have strongly criticised the proposed tax changes, particularly the abrupt cancellation of long-term tax benefits.
The tax issue comes at a time when the VAT rate for electronics items has already been increased to 7.5%, and further hikes are being discussed for the upcoming fiscal year.
According to NBR sources, the tax rate for companies in the motorcycle, air conditioning, refrigeration, and compressor manufacturing sectors was initially set at 5% in 2019, before rising to 10% in 2021.
This rate was supposed to remain unchanged until 2032.
Currently, corporate tax rates range from 25% to 27.5%.
In November, the International Monetary Fund (IMF) set a condition for the NBR to collect an additional Tk12,000 crore over the original target for the current fiscal year, prompting the NBR to increase VAT and taxes across various sectors to meet revenue goals.
It is expected that the tax hike on these four product categories will generate an additional Tk1,000 crore annually.
