The chamber also called for withdrawal of 6% ceiling on the import of machinery based on the sales of previous year.
MCCI president Nihad Kabir came up with the call while addressing the first quarterly luncheon meeting of 2017 in the capital yesterday.
Bangladesh Bank Governor Fazle Kabir was present at the programme as the chief guest.
“Currently, 20% source tax is imposed on the remittance of foreign sales agent commission and acquisition of foreign technical know-how or royalty payments,” said Nihad.
The section 30 (h) of the Income Tax ordinance disallows expenditure on such foreign technical know-how or royalty payments if exceeding 8% of the net profit disclosed in the statement accounts.
These provisions are major deterrents to acquisition of new technology and know-how that can help Bangladesh move up the value chain and become more competitive in the international arena, said the business leader.
“As per the existing rules, for new project an entrepreneur cannot import machinery, which exceed 6% of previous years’ sales as declared in the income tax returns.”
There is no need to set a limit on the import, rather the government can verify the amount as to how much the importer spends and for what purpose, she said, adding that the law was enacted when Bangladesh reserves had been $1 billion while now it is over $32 billion.
It increases the cost of acquiring technology or brands or using international sales agents that can open up new markets and bring better prices for home products, said Nihad.
She argued that the 6% limit is arbitrary and does not really bear a relationship to the realities of commerce in modern times.
The chamber also expressed concern over the rise of Non-Performing Loan (NPL), capital flight and undisclosed money, which are the key elements negatively affecting the growth of internal investment.
It also praises Bangladesh Bank for its Monetary Policy which took measures to keep inflation within a tolerable level and cautionary steps for the capital markets.
Talking on the NPL, Governor Fazle Kabir said it is very high and alarming to the state-owned banks.
“I have been trying hard to bring back normalcy to the banking sector.”
The export and import are in the line, but there is a problem with the remittance, as it has seen fall due to low payment by employers, decline in oil prices and upward flight of commodity price, said Kabir.
He added that remittance has fallen due to transaction in non-banking channel.
Meanwhile, MCCI also requested the central bank to ensure that the limits for individual firms for using Export Development Fund (EDF) should be the same for RMG and non-RMG sector if they really want diversification of exports.
At present, the limit for the RMG sector is $20 million and for the non-RMG $15 million.
“Surely we should set higher limits for those we wish to promote,” said Nihad Kabir.
The chamber also expressed concern about the existing interest on loans to the Small and Medium Enterprise (SMEs) as the entrepreneurs in the sector are yet to get the benefits of low-interest rate, which is now enjoyed by the industrial, agriculture and trading sectors following the decline in overall interest rates in the country.
Responding to the MCCI call, the central bank governor said it is not interest, but collateral, which is a problem for the SME sector.