New agro entrepreneurs to get 10-year tax exemption
The facility comes with a number of conditions including the minimum investment of Tk1 crore
To generate new investments and to step up job creation in rural Bangladesh, the government in the next budget is going to provide new entrepreneurs in four agro-based sectors with a 10-year tax exemption facility, said finance ministry sources.
The sectors are agri processing, fruit processing, milk and dairy production, and farm machinery manufacturing.
According to the sources, entrepreneurs who will invest in the sectors from 1 July 2021 to 30 June 2030 will qualify for the tax exemption on revenue for the first ten years of their commercial production.
Agro-based entrepreneurs who already are in the businesses will not get the facility even if they set up a new unit, or merge with a new venture, said the finance ministry officials.
They say Bangladesh lags behind in innovative and diversified agro products despite having plenty of fruits and vegetables. The government wants to attract new investments to the sectors to encourage product diversification since the country now exports only some raw agri items.
According to the Export Promotion Bureau (EPB), fresh vegetables and fruits worth $164.5 million were exported in the fiscal 2019-20.
Meanwhile, the Department of Livestock Services says 106.80 lakh tonnes of milk were produced in the 2019-20 fiscal year against the annual demand of 152.02 lakh tonnes. Only 5% of the milk went to the milk and dairy processing units while the remaining milk was sold locally and used for sweet and sweetmeat-making.
Md Mosleh Uddin, chief operating officer (Dairy) of Akij Food & Beverage Ltd, thinks the budget support will bring in new players in the market, which will help expand the sector.
Exemption requires govt registration, Tk1 crore investment
There are a number of conditions that must be met by the new investors to qualify for the tax exemption.
The manufacturers must get registered with the Bangladesh Investment Development Authority (Bida) and the investment must be at least Tk1 crore. Conditions have also been levied on raw material collection for the factories. The raw materials must be produced locally.
Otherwise, the manufacturing units will not get the exemption facility. On top of this, if the production and processing units face any fine by any government agency for substandard foods or unhygienic factory environment, the facility will go away.
Moreover, the investors will have to strictly follow the Income Tax Ordinance 1984 since any violation of the tax law will meet with facility revocation, and the manufacturer will be charged with the regular tax rates.
The tax exemption on defining farm machinery said any kind of equipment used for cultivation or farming. The manufacturers at their production facilities will have to add at least 30% value to the imported fuel-run or electric equipment.
According to the Agricultural Machineries Manufacturers Association, there are about 5,500 local farm machinery manufacturers in the country.
'Minimum investment should be reconsidered'
Dhaka University economics teacher Prof Dr Sayema Haque Bidisha told The Business Standard that the initiative was positive but the condition for a minimum investment of Tk1 crore should be reconsidered.
"Because investing Tk1 crore is a big deal for a rural and small entrepreneur," she noted.
Dr Bidisha also said those who have already been in agro-based businesses on a limited scale can also get the support.
Fish farmers to pay more tax
The upcoming budget proposes 15% income tax on fish farmers with an annual income of more than Tk30 lakh. At present, fish farmers with more than Tk20 lakh annual income pay only 10% tax.
According to the finance ministry sources, influential people often show the money earned from various sectors as income from the fisheries sector. They do it to pay less tax since the tax rate on individual income is 25% — way more than the tax rate on fisheries income.
In the wake of such incidents, the ministry has changed the tax threshold on the income of the fisheries sector.
Under the existing law, there is no tax on Tk10 lakh income from fisheries while there is only 5% tax on the next Tk10 lakh income. This is likely to remain unchanged in the next national budget for the 2021-22 fiscal year.
In the fisheries sector, the current law levies 10% income tax for any amount of income above the first Tk20 lakh. In the next budget, income above Tk20 lakh but below Tk30 lakh will be charged with 10%, and income above Tk30 lakh with 15% income tax.
