Hurrah for Bangladesh Inc!

Bangladesh Inc got a big boost yesterday as the proposed budget offers a raft of incentives for business and manufacturing.

They got a big corporate tax cut – a long-standing demand of the business community – which they believe will improve the business environment.

Promises have been made to continue subsidy and stimulus for industries in the aftermath of the Covid pandemic. Tax at source has also been reduced.

Start-ups will get a new life as their turnover tax has been reduced drastically and they will be allowed to carry forward losses over a period of nine years.

Research and development spending by companies has been allowed to be shown as expenditures without any ceiling. Companies' perquisite ceiling has been increased from Tk5.50 lakh to Tk10 lakh per person, allowing businesses to rope in good talents with lucrative job offers.

Proposals have been made for ease of doing business in many areas, such as amendments of input tax credit so that businesses may get rebates easily. Owners of raw materials will be allowed to deliver goods directly to contract manufacturers.
Amendments have been proposed in the rules of VAT deduction at source to simplify the process.

To crease out business difficulties, penalties have been reduced and payable time increased in case of VAT disputes.

Changes in VAT rates have been proposed for a number of industries, such as steel and Pet chips. VAT has also been reduced in wholesale trading.  

Some manufacturing sectors have been kept out of the tax structure as a continuation of the current strategy. Ocean-going vessels have obtained relief from tax on forex income till 2030

Slashing corporate taxes for all exporters other than the readymade garment industry from 30% to 12% and even lower to 10% for green ones is a big boost for business expansion and new investments in the export sector.

And what lies in the budget for FY23 mainly for local businesses including listed, non-listed and one-person companies are laudable too as they have been offered a cut of 2.5 percentage points in corporate taxes, subject to compliance with certain conditions, such as going for cashless transactions. 

Abul Kasem Khan, a trustee of BUILD Bangladesh, told The Business Standard, "I think it is a business-friendly budget as all measures aim at controlling inflation."

There are still some challenges as businesses do not get refunds of the advance income tax they pay in 111 sectors, he noted.

At a time when all manufacturers are reeling under soaring input costs, the finance minister in his budget unveiled on Thursday in parliament also came up with some relief for them with a tax cut on supplies of goods to 5%, raw materials 4% and books to 3% from the existing 7% for all. 

The new budget also proposed exempting VAT on local manufacturing of active pharmaceutical ingredients and local purchase of raw materials of refrigerators and withdrawing advance tax on imported raw materials of polypropylene staple fibre. Manufacture of power tillers is also exempted from VAT. 

New entrepreneurs have not missed out on benefits either as the budget has also offered a "startup sandbox" to motivate them. For example, a minimum tax rate for them has been slashed to 0.1% from 0.6%. They are also allowed to carry forward their losses for up to nine successive assessment years.

Amid all such measures aimed at making doing business easier, there are some new challenges in the new budget which exporters might find tougher to negotiate. Source tax on all export sectors has been raised to 1% from 0.5%.  

Businesses that were so far required to show TINs will have to show proof of return submissions from next year. Otherwise they will have to pay a fine ranging from Tk5,000 to Tk20,000. The proposed budget has also imposed 5% VAT on locally-made mobile phones and refrigerators.
 
Rizwan Rahman, president of Dhaka Chamber of Commerce and Industry, said, "The new budget has fulfilled 50% of demands by businesses. Tax rationalisation will reduce dependence on a single sector and offer others opportunities to grow further." 
 
Stating that 99% of businesses will be able to benefit from this conditional corporate tax cut, he said the petty cash maintaining condition has been equal for both small vendors and large conglomerates, which is not justified.  
 
Instead, the government should fix a certain percentage of turnover for cash transactions, he noted.