Wants a 2.5% cut in FY2021-22, followed by a further 2.5% in FY23 and another 2.5% in FY24
The Dhaka Chamber of Commerce and Industry (DCCI) is expecting corporate tax rate cuts in phases, starting with the upcoming national budget for the next fiscal year 2021-22.
As per a plan submitted by the chamber to the National Board of Revenue (NBR), it sought a 2.5% cut in FY2021-22, followed by a further 2.5% in FY23 and another 2.5% in FY24.
Speaking to the Dhaka Tribune on Thursday, Rizwan Rahman, president of DCCI, stated that the corporate tax rate needs to be downsized for boosting private investment.
The government had reduced corporate tax for non-listed firms from 35% to 32.5% in the last fiscal budget (FY21), while the tax rate for publicly traded companies stayed unchanged at 25%.
However, according to DCCI, the corporate tax rate in Bangladesh is very high in contrast to neighbouring countries. The average rate of tax in India is 25.2%, in Pakistan it is 29%, in Sri Lanka it is 28%, and 20% in Vietnam, Indonesia, and Myanmar.
The DCCI also wants the time taken to process value added tax (VAT) rebates for businesses to be shortened from an existing three-month period to one month, and the exemption of paying VAT at source for businesses that are paying 15% VAT.
Rizwan further proposed to exempt advance tax on import (AIT) of industrial raw materials and capital machinery, increasing the turnover limit for businesses to Tk4 crore from the current Tk3 crore, and resolving the issue of businesses paying double excise duty on obtaining loans from banks.
“I am hopeful that the government will focus on implementing a business-friendly, revenue-friendly and industry-friendly budget. The upcoming budget should address taxation and VAT policy, infrastructure, industry and trade as well as the financial sector,” he added.
Regarding the provisions of whitening black money in the upcoming budget, Rizwan said: “DCCI has always opposed the provision of whitening black money. It is discriminatory to honest tax payers and will dishearten businesses owners who play by the rules.”
He urged that even if the government decided to keep the provision, it should be able to clearly distinguish between “black money” -- that comes from criminal activities such as drug smuggling, human trafficking, bribery, etc. -- from that of undisclosed and untaxed money.
If the government has to allow such provisions, the money needs to be invested in areas that create jobs, he added.
He proposed the government to reconsider investing in infrastructure through BEZA, blue economy, etc., in contrast to the stock market or the real estate sector.
According to researchers and businesspeople, whenever a huge amount of money is poured into a certain sector, it artificially increases its prices, inducing a bubble.
A possibility remains that this can lead to an artificial inflation as black money holders would invest in the market and leave as soon as their money is whitened, causing a market “crash” or the bubble to burst.
The DCCI leader also demanded incentives for the leather sector, identical to that given to the readymade garments sector, and a cut in corporate tax rates for green companies of the leather sector.
Tax deducted at source should be considered full and final for export sectors like leather. Tax for the sector should also be brought down to RMG levels, Rizwan also said.
He suggested applying the RMG success model not only to leather, but other promising sectors, like pharmaceuticals and light engineering.
He also sought tax benefits for research and development activities of companies, revision of the provision of minimum tax under section 82C, reduction of the tax rate on gross receipt of businesses, and automation of income tax and VAT departments.