Businesses are calling for long-term policies and tax reforms


FE REPORT
| Published: June 12, 2024 00:08:42


Businesses on Monday called for long-term policies and tax reform, saying these measures would help attract both local and foreign investment and increase revenue collection.
They also asked the government to review some of the proposed fiscal measures, including a reduction in withholding tax for export-oriented sectors, the proposed import duty on capital machinery for factories in economic zones and ensuring uninterrupted gas supply.
These observations were made during a post-budget discussion organized by the American Chamber of Commerce in Bangladesh (AmCham) at a city hotel. Dr. M Masrur Reaz, chairman of Policy Exchange of Bangladesh, moderated the discussion.
Mahbubul Alam, chairman of the Federation of Bangladesh Chambers of Commerce and Industries (FBCCI), said a long-term policy of at least five years is essential to attract both local and foreign investments. This would allow investors to plan and run their businesses more effectively, he said.
“We want to pay taxes and VAT, but it must be done smoothly,” he said, calling for measures to widen the tax net instead of putting pressure on existing taxpayers.
In this regard, Mr Alam recommended formalizing the country’s large informal sector, which would help increase revenues.
The FBCCI president also suggested that the National Board of Revenue (NBR) should introduce separate units for collecting revenue and implementing policies.
He criticized the government’s proposed measure to increase penalties for errors in HS commodity codes from 200 percent to 400 percent. He said customs officials receive a 20 percent dividend and this policy should be reviewed.
Seeking uninterrupted gas supply, Mr Alam also called for the immediate implementation of the logistics policy, arguing that it would help reduce operating costs once put in place.
Nihad Kabir, former president of the Metropolitan Chamber of Commerce and Industry (MCCI), said the topics of discussion, including inflation, GDP growth, macroeconomic policy, tariff policy and corporate tax rates, have remained the same as those discussed a decade ago.
“The NBR is still trying to collect revenue in the same way it has been done for the last 50 years,” she said. “We need a structural change in how revenues are determined, collected and how tax policy is made in this country.”
Speaking about more than 300 development projects on the verge of cancellation, she said challenges create opportunities, adding that this is the chance to press ahead with regulatory reform.
“Now is the time to scrutinize where the leakages and inefficiencies lie and prioritize addressing our performance gaps,” she suggested.
Masrur Reaz presented a brief overview of the proposed budget for the financial year 2024-2025 and emphasized the focus on predictability.
The income tax rate is expected to remain stable at 28 percent over the next five years, with a tax rate of 30 percent for high income earners. However, a policy that allows undisclosed money to be formalized at a lower rate undermines regular taxpayers, he said.
Mr Reaz said the budget’s tax revenue targets appear unrealistic given the current economic climate and projected deficits. It could have done more to address the consequences of inflation head-on.
Reaz also noted a decline in budget allocations for two key sectors. “Transport and connectivity, crucial for businesses – which includes trade infrastructure, logistics and connectivity – has seen a decline,” he said. “There is also a reduction in energy and power allocations, especially in energy, by approximately 13 percent.”
Former NBR Chairman Muhammad Abdul Mazid pointed to the NBR’s inefficiency as the reason for its continued low revenue collection despite the country’s potential.
He said the proposed budget increases the burden of indirect taxes, which would not help curb inflation. He emphasized the separate formulation and implementation of tax policies, arguing that it is contradictory for the NBR to do both.
Ashraf Ahmed, chairman of the Dhaka Chamber of Commerce and Industry, said tax rates for economic zones would not generate revenue.
Moinul Huq, country officer of Citi, Bangladesh, Citibank, highlighted foreign exchange inflows and improving the implementation rate of annual development projects.
He also suggested taking export growth into account, noting that there is a possible discrepancy between the value of shipments and the value realized.
“So that also needs to be clarified, what kind of gap we actually have, what is a real gap or actually there is a mismatch, but I think another point also comes under the discussion,” he noted.
Mr Huq expressed hope for an improved situation by the end of the year.

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