• Thursday, Feb 09, 2023
  • Last Update : 10:24 am

Tax exemptions in key industries might just pay off in spades

  • Published at 12:32 pm June 7th, 2021
Agriculture farming
Agricultural workers in action at a farm in Kaharole upazila in Dinajpur Syed Zakir Hossain/Dhaka Tribune

This year’s budget gives tax breaks to industries such as agriculture, food, and home appliance products, light engineering, ICT, women-led SMEs, private hospitals and more

The government has given tax breaks to some new sectors in the proposed budget for the fiscal year 2021-22, which include agriculture, food, and home appliance products, light engineering, ICT, women-led SMEs, private hospitals as well as “Made in Bangladesh” products, to attract investments.

Institutions that will invest in these sectors will get tax holiday benefits for the next ten years.  

Finance Minister AHM Mustafa Kamal, in his budget speech last week said that various types of tax exemptions, deductions, or tax benefits are given for the sake of industrialization, employment generation, increasing the scope of business, protection of domestic industries, the attraction of foreign investment, and establishment of a just and equitable society. 

He proposed a tax exemption of ten years on producing some selective IT hardware manufactured in Bangladesh under certain conditions.

New IT-enabled services entailing system integration, e-learning platform, e-book publication, mobile application development service, and IT freelancing will also enjoy tax exemptions.

Also Read - Budget FY22: A budget of tax cuts and exemptions

“Every year, we advocate the government to include new services under the definition of IT-enabled services (ITES). The exemption on new services that have been incorporated under the definition is a commendable move by the government. However, the budget did not reflect our proposed taxation on internet service, and the government needs to reconsider the matter,” said Syed Almas Kabir, president of the Bangladesh Association of Software and Information Services (BASIS).

“We urge the government to extend the tax exemptions till 2030 as there are multiple targets to fulfill in the coming days. A longer period of tax exemption would facilitate further investment in the sector,” he added. 

BASIS had also previously urged the government to increase tax for internet-based businesses- streaming platforms, telemedicine, e-commerce platforms- in contrast to taxing internet services.

It had also urged the government to allocate a Tk500 crore fund regarding technical assistance projects to enable the Bangladesh government to pursue agreements with foreign governments of developing and least developed countries to solicit technical support from local businesses in the ICT sector.

Also Read - Budget FY22: IT sector gets tax exemptions for 22 tech services

According to the BASIS president, the budget should also clearly indicate how the private sector will benefit from the allocated Tk1720 crore in the ICT sector. The government should solicit local industry support in installing software services for the mega projects the government has undertaken. 

Tax exemption will also be offered for ten years to general hospitals with a minimum of 250-bed capacity and those having children and infant care, women and maternity care, oncology, wellbeing, and preventive medicine units.

Dr Moniruzzaman Bhuiyan, the president of Bangladesh Private and Diagnosis Owners Association (BPCDOA), told Dhaka Tribune: The move is commendable. We thank the government for taking the necessary steps that will encourage relevant people to build hospitals outside of Dhaka.” 

The finance minister also proposed continuing the existing exemption facilities at the import, manufacturing, and trading stage on Covid-19 test kit, personal protective equipment (PPE), and vaccine, as well as reducing duty and taxes on ingredients used in anti-cancer medicine manufacturing and API for medicine manufacturing.

Mahzabin Ferdous, secretary general of Bangladesh Cancer Aid Trust (BANCAT), said that the government should incentivize the accessibility of cancer drugs or medicine in regional and divisional zones, the way it had incentivized the development of hospitals outside of city centres.

Speaking to Dhaka Tribune, she said that the government’s move of continuing exemption on much-needed Covid-19 battling tools as well as tax cuts on anti-cancer medicine manufacturing is commendable. 

Also Read - Budget FY22: Tax exemption for locally manufactured goods

But accessibility to cancer-treating drugs and medicine should be made easier for regional and divisional zones, she also said.

The government had also proposed tax holidays for electronic consumer goods manufactured in Bangladesh.

The proposed tax cuts and exemption on the products under 'Made in Bangladesh' tagline will boost up the local industrialization, development and thus, the country's production will increase, said Uday Hakim, executive director of Walton Hi-Tech Industries Limited

“Ultimately, the nation and local consumers will be benefited.  It is a domestic industry-friendly budget. New investments will be made in this sector which will create more employment. The coronavirus pandemic dealt a big blow to all the business sectors in Bangladesh. The domestic industry was badly affected and suffered. This move will help to overcome the blow,” he added.

Kamal further proposed to offer tax exemptions for companies engaged in the production of automated vehicles in Bangladesh to promote local brands. 

The proposed budget also placed a VAT exemption at the local manufacturing stage on the production of sanitary napkins plus a two-year extension of existing VAT exemption on importation of certain raw materials used to produce sanitary napkins diapers.

Monjun Nahar, lead advocacy and communication of Marie Stopes Bangladesh, said: “This is a great move. We have been urging the government for years now to make sanitary napkins affordable at the rural level. Even before the pandemic, the price of exercising such a basic human right was too high.”

“But, going forward, the government should focus on distributing subsidized sanitary napkins with special focus on environment-friendly materials in producing these goods that help in waste management,” she added.

According to industry officials, the annual market size of sanitary napkins is about Tk400 crore, which is growing at 20% per year. The infant diaper market is Tk300 crore, and its growth rate is 15%. 

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