Uncertainty in view of Covid-19 and consequent repercussions creating added pressure for Bangladesh economy. In the proposed national budget for the next fiscal year 2020-2021, the government has taken certain measures in support of investment or for protecting critical domestic industries in the crisis.
In addition, health sector, SMEs, government infrastructure developments, air-ocean transport business, hospitality services and the related linkage goods and services will face serious consequences even after the alleviation of coronavirus crisis.
It's good that the government has given good allocation in technology. However, money has to utilize by implementing the Automation in the National Board of Revenue (NBR).
Need to develop all the ports of Bangladesh ( both infrastructure and management) for attracting foreign direct investment (FDI). Need to develop Railway and waterways service for transportation of goods and passengers. This is cost effective and can ensure adequate supply chain management.
Waterways and railways development will also help the common people to reduce the cost of transportation for both goods and passengers ensuring smooth supply chain. We emphasise key procedural matters to the proposed budget in the following notes:
Automation and introduction of e-payment and e-TDS system: The COVID-19 pandemic and the resulting closure or disruption of regular governmental services now require accelerating the utilization of online tools and e-platforms. We recommend introducing the e-payment and e-TDS system as the online submission of tax returns will not work without it.
VAT payment lead time: We request to reduce the number of VAT payments from monthly to quarterly, expediting the VAT refund process under the new VAT law, automating the submission of tax returns and developing risk profile of businesses and making audits more efficient through the developed risk management system.
Modernisation of the Customs Law and disputes: The Customs Act, 1969 needs to be modernized with the launch of provision for full implementation of Revised Kyoto Convention, introduction of World Customs Organization (WCO) SAFE Framework of Standards. We recommend that importers are allowed to release goods, in case of disputes, by giving bank guarantees for only the disputed amount.
Facilitating foreign direct investment (FDI): The ongoing pandemic may bring about relocation commercial and industrial hubs around the world. Bangladesh has ample scope to attract such migration of investments soon. We recommend that single approval process in all ports to allow import of capital machinery and remove time bar for the same.
Royalty transfer, technical know-how fees etc. for economic zones: Newly-established foreign entities operating in Economic Zones (EZs) are allowed to remit the royalty, technical know-how and technical assistance fees. We recommend increasing the rate for new projects from 6 percent to 8 percent.
Reduction of "corporate" & "withholding" tax rate: We request the government to consider this area in the forthcoming budget and reduce the rate of corporate taxes at least by 5 percent. We also request to reduce withholding tax rates with a lower limit of 5 percent with a higher range of 10 percent and where the withholding taxes are higher than the actual legitimate tax liability, the National Board of Revenue (NBR) should exempt the tax to that extent.
Tax incentives for all business: We recommend that the NBR should declare waiver of VAT at the domestic stage for the period of March-June, 2020, and payment of corporate taxes for assessment year 2020-21 by instalments till March, 2021.
Special package for monetary and sector-specific measure during pandemic: We request deferred payment of loan-instalment, deferred payment of fees of public utilities without late charge, an extension of time for payment of the bill of entry of import-related letter of credits for the concerned business houses. We request special package with a revolving loan fund facility at a subsidised interest rate for the affected business houses considering the adverse financial condition faced for foreign investors in Bangladesh.
Tax incentives for capital market: We recommend reducing the tax on dividend, tax exemption of newly foreign investments at least for 2 (two) years. Further, we recommend including tax incentive proposals for stock exchanges, Trading Right Entitlement Certificate (TREC)-holders, general small investors in the proposed budget for the 2020-21 fiscal year.
Syed Ershad Ahmed is the president of AmCham