Tax cut demanded if energy subsidy is lifted

Businesses from different sectors, in a pre-budget discussion on Wednesday, demanded a drastic cut in taxes on electricity and fuel if the government lifts energy subsidies, so that industries, as well as individual consumers, can afford the prices. 

Taking part in the programme at the Bangabandhu International Conference Centre in the capital, State Minister for Planning Shamsul Alam also agreed with the businesspeople on the tax cut.

"In the next two to three years, all types of subsidies on electricity and fuel will be lifted. Hence tax rates should be revisited [reduced]," said Imran Karim, former president of the Bangladesh Independent Power Producers Association.

Currently, the National Board of Revenue collects Tk25,000-27,000 crores in taxes per year from the power sector, while the amount of subsidies is more or less the same, he noted.

"In the case of the subsidy withdrawal, electricity prices will go up suddenly. If your [the government] demand for tax remains the same, we will face a double whammy. It should not happen," he said. He proposed lowering overall taxes on energy to 22% from the existing up to 48%. "The cut in taxes will not cause much loss to the government."

Calling for an effective tax rebate system, he explained that per unit electricity price increases by Tk2-3 just because of its absence. 

Imran Karim said although imported electricity has no tax, local power producers have to pay taxes. "What is our fault in doing business in our own country, then?" he asked.

On fuel imports, he questioned the rationale of charging 7-10% tax deduction at sources in every layer after fuel import. "To afford taxes at such rates, our profits need to be 30-40%. Is there any business in the country where 30-40% profit is made?"

Federation of Bangladesh Chambers of Commerce and Industry President Md Jashim Uddin said, "We are losing our capacity thanks to higher duties, up to 48%, on fuel imports. If the government keeps such a high tax just to manage subsidies, we would request it to withdraw taxes on fuel. We need breathing space."

"If there is no subsidy, then what is the need to take tax? I think the proposal of businesspeople is good," State Minister Shamsul Alam agreed with businesspeople.

On the next budget, he said it will not be ambitious, "There is no chance to be ambitious this time. Even the Annual Development Programme will not increase as it should. There will be a mechanism for the government to move towards fewer debts."

The Dhaka Chamber of Commerce and Industry, also known as DCCI, organised the talk to place their demands before policymakers so that the government can formulate a time-befitting budget for FY24. DCCI president Sameer Sattar and former FBCCI Presidents AK Azad and Shafiul Islam Mohiuddin spoke at the session in which business leaders from different sectors took part.

No representative from the National Board of Revenue, however, was present.

Speakers said businesses are now under pressure, caused mainly by the Covid-19 fallout and the Russia-Ukraine war. In such a situation, the collapse of United States banks is also intensifying the crises.

The economy has shrunk, and opening letters of credit is almost closed. No industry utilises more than 40% capacity, they added.

"Take an investor, for example, who has employed one lakh people, invested Tk23,000 crore, and pays Tk250 crore monthly in loan repayments. His industries are now lying idle just because of a shortage in gas supply. Consider, then, our business situation," said AK Azad, former president of the FBCCI and managing director of Ha-Meem Group.

Businesses come down heavily on NBR

Business leaders came down heavily on the National Board of Revenue as it did not send any representative to the crucial pre-budget discussion. 

"No one from the NBR is here. This is unprecedented. What do revenue officials think of themselves? Be they high officials or whatever, they are assigned to serve the country," said Shafiul Islam Mohiuddin, who is also a member of parliament.

Pointing at former NBR chairman Md Nojibur Rahman, who was present at the event, the business leader said, "He used to go to the FBCCI and listen to us."

"The government must listen to the business community. We may have differences in opinion. Through debate, we try to find common ground, which should be taken into consideration in the interest of the country."

"Some people [NBR officials] turn into dominating characters after they reach the Prime Minister. This mindset needs to change. The Prime Minister is working day and night to serve the country…. through this realisation, they [NBR officials] should change their attitude."

Criticising the traditional way of appointing NBR chairmen, the former FBCCI president urged the government to have NBR chiefs come from among revenue officials, instead of from the administration cadre. "The officers of the NBR have enough capability. Then why doesn't leadership come from them? Why should we hire chairmen from outside?"

"In discussions in the past, the finance minister and the NBR chairman used to be present and take notes. But in today's discussion, there is no minister and no NBR representative. What does it mean?'' A.K. Azad wondered if the red tape culture in the country is getting worse.