Corporate Bangladesh smiles
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The Business Standard
FRIDAY, MAY 20, 2022
FRIDAY, MAY 20, 2022
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Corporate Bangladesh smiles

Budget

Jasim Uddin
03 June, 2021, 10:20 pm
Last modified: 04 June, 2021, 01:36 pm

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Corporate Bangladesh smiles

Under his “Made in Bangladesh” goal, the finance minister laid out incentives to a waft of sectors from IT to home appliances, to light engineering to automobile to agro-processing

Jasim Uddin
03 June, 2021, 10:20 pm
Last modified: 04 June, 2021, 01:36 pm
Corporate Bangladesh smiles

It's time to invest and flower entrepreneurship, as the budget proposals suggest.

Corporate Bangladesh will enjoy the biggest and widest ever tax cuts and tax holidays with the finance minister hoping this will expand the formal economy and entrepreneurs will grow.

Under his "Made in Bangladesh" goal, he has laid out these incentives to a waft of sectors from IT to home appliances, to light engineering to automobile to agro-processing. The move is aimed at accelerating Covid recovery through energising the import-substitute industries.

Four-wheeler and three-wheeler manufacturing industries will get a 20-year tax holiday on certain conditions. Besides, the government is offering a 10-year tax exemption on new investments in another six sectors, including production of home and kitchen appliances, as well as light engineering products.

The companies must get registered with the Bangladesh Investment Development Authority (Bida) to avail this tax facility.

Apart from these measures, another corporate tax cut has been proposed for employing transgender people. The budget also mentioned further steps to widen the formal economy and create jobs to build a strong foundation for higher tax revenue.

In the line of industry expansions, the government is also offering 10-year corporate tax exemptions for investments made in training institutes for about 25 types of skill development, to achieve the Sustainable Development Goals (SDGs) by 2030.

The training institutes can get full tax exemptions if they introduce training in agriculture, fisheries, science and technology, automobile, aircraft maintenance, food, footwear, glass, mining, mechanical, shipbuilding, leather, refrigeration, ceramics, garment design and pattern-making, pharmacy, nursing, integrated medical, radiology and imaging, ultrasound, dental, animal health and production services, clothing and garment finishing, and poultry farming.

To get this facility, an institute must register under the Companies Act 1994, its minimum investment must be Tk5 crore.

Moreover, an institute must take permission from the Bangladesh Technical Education Board, Directorate General of Health Services (DGHS) or Bangladesh Nursing and Midwifery Council, and follow the National Skills Development Policy.

An institute must have permanent teachers, trainers, necessary infrastructure, and active labs or workshops as per the National Skills Development Policy, and it can get full tax exemptions only for earnings from training and education.

A National Board of Revenue (NBR) official, on condition of anonymity, said the board is focusing on creating more jobs and expanding the area of the formal economy by offering tax cuts.

"It might appear that we are losing focus on realising the next tax target, but if our proposal gets approved, we will be able to bring more investments in those sectors. This in turn will boost our revenue in the coming days."

New investments in the home and kitchen appliances sector – for producing washing machines, blenders, microwave ovens, electric sewing machines, induction cookers, kitchen hoods and kitchen knives – will get the tax holiday only if its value addition reaches a minimum 30%.

The light engineering manufacturers will enjoy a 10-year tax holiday for all types of products in this sector, but under the criteria that those products will only be used for only industrial purposes, and there will be no complete instrument, only parts.

The government is offering a 10-year tax holiday to encourage investment in the hardware industry to produce motherboard, casing, UPS, speaker, sound system, power supply, USB cable, CCTV and flash drives.

These companies should be registered with the BIDA and its value addition should be at least 30%.

Besides, the government is extending the tax exemption facility to five new IT sector services in the new fiscal year, aiming to take the dream of building a digital Bangladesh one step further.

Currently, 22 IT-enabled services enjoy the tax exemption facility. The six new services are – cloud service, system integration, e-learning platforms, e-book publications, mobile application development services, and freelancing.

Around 1,600 software and IT companies are presently operating in Bangladesh, according to the Bangladesh Association of Software and Information Services (BASIS). Among them, around 250 export ICT goods amounting to $800 million to 60 countries annually.

According to the USAID, North America is the main destination for Bangladeshi software and ICT products.

The government is also offering 10-year tax exemption to help the agro-based industries flourish and to boost employment generation through production of import-substitute agricultural products in Bangladesh.

New investment in agro processing – especially in locally produced fruits and vegetables, milk and dairy products, baby food produced entirely from locally grown agricultural products, and manufacturing of agricultural machineries – will enjoy the ten-year tax exemption facility.

Agro-based entrepreneurs who are already in the businesses will not get this facility even if they set up a new unit, or merge with a new venture, finance ministry officials told The Business Standard.

The officials said Bangladesh lags behind in the production of innovative and diversified agro products despite growing plenty of fruits and vegetables. The government wants to attract new investments in these sectors to encourage product diversification, because the country currently exports only a handful of raw agro items.

According to the Export Promotion Bureau (EPB), fresh vegetables and fruits worth $164.5 million were exported in the Fiscal Year 2019-20.

The government is mulling a 10-year tax break on investments for setting up specialised hospitals with the goal of ensuring quality health services at an affordable cost.

To get this facility, investors will have to build either a 200-bed specialised hospital or a 250-bed general hospital with units for Children and Neonates, Women and Maternal Health, Oncology and Well Being and Preventive Medicine.

Every hospital must have at least 5% ICU beds and such an investment will have to be made outside Dhaka, Chattogram, Gazipur, and Narayanganj districts.

Currently, almost all specialised hospitals are based in Dhaka and Chattogram cities. The new initiative will encourage investments in marginalised areas, which will provide healthcare services to people in those underserviced areas, according to experts and entrepreneurs.

According to the DGHS data, there are 6,201 public hospitals and healthcare facilities in Bangladesh, while the number of specialised hospitals is about 23.

As of June 2019, the DGHS provided registrations to 15,728 private hospitals, clinics, diagnostic centres, and blood banks. The number of registered private hospitals and clinics is 5,321, and that of registered private diagnostic centres is 10,407.

The government has decided to provide policy support for building a strong bond market as an alternative to banks for sourcing long term finance for entrepreneurs.

As a part of its policy, the new budget offers tax exemption on the applicable capital gain tax at the time of transferring property to a trust or Special Purpose Vehicle, or transferring property by a trust or Special Purpose Vehicle, and vice versa.

The move has been taken with the goal to popularise and create a strong market for Sukuk or Islamic bonds.

Economy / Top News

Corporate / Budget

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