Cut source tax on exports, continue cash incentives until LDC graduation, businesses urge

Businesspeople have called for reducing taxes deducted at source during exports and continuing cash incentives for exporters until the country's graduation from least developed country (LDC) status.

In a pre-budget talk with Finance Minister AHM Mustafa Kamal in the capital Monday, they also called for lifting advance taxes on raw material imports, cutting the cost of doing business by improving the business environment, and taking effective measures for preventing tax dodging. 

"We proposed to the finance minister to cut source tax on exports to 0.5% from the existing 1%. We also requested him to withdraw advance tax and advance income tax on raw material imports and reduce tax pressure on small and medium enterprises," Federation of Bangladesh Chambers of Commerce and Industry President Md Jashim Uddin, who participated in the meeting, told The Business Standard. 

Mentioning that exports, one of the key drivers of the economy, suffer a lot due to poor road communication systems, he said vehicle speed on the Dhaka-Chattogram highway is now 20-25km per hour. "If we can take it to 60km an hour, our export capacity will increase by 7%." 

On revenue collection, the business leader said at the meeting that the country receives income tax from 27 lakh individuals only whereas holding taxpayers are above 3 crore in number. "It means that the government has a huge scope to widen the [income] tax net. The net for value-added tax also can be increased."

Taking part in the meeting, Bangladesh Garment Manufacturers and Exporters Association President Faruque Hassan said production costs in the apparel sector have increased abnormally with the price hikes of gas and electricity and the country is likely to see negative growth in exports from this month.  "Hence, a cut in source tax on exports can give us slight relief. We also want cash incentives to be continued until 2026." 

Criticising the planned lending cap withdrawal, he added that it will turn small-scale entrepreneurs into losers in the long run. 
Bangladesh Textile Mills Association President Mohammad Ali Khokon proposed keeping recycled fibre VAT-free and said that cotton and garment industries waste 250 million kg every year. "The country's yarn import will decrease by 15% if the wastage can be recycled."

He also requested the finance minister to address all types of tariff and non-tariff barriers in the import of man-made fibre.

Metropolitan Chamber of Commerce and Industry President Md Saiful Islam said almost 95% of companies have failed to avail the facility of reduced corporate tax rate, 27.5%, due to conditions in limiting cash transactions. "We urge the government to lift such conditions in the next budget."

Calling for uninterrupted gas supply to industries, he said, "The government should let us know how it will adjust LNG and fuel oil prices in case of a withdrawal of subsidies."

Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh President Syed Nasim Manzur said that the export market of leather and synthetic footwear goods in the world is worth $328 billion, while Bangladesh can bag only $1.2 billion.

"This year, our competitor India has undertaken a footwear development programme by investing 1,700 crore rupees, while Brazil, Vietnam and Pakistan are also taking aggressive steps. To face the competition, we have no alternative to reducing the cost of doing business. The next budget should be formulated by keeping this in mind," he told the pre-budget meeting, seeking equal benefits in importing machinery for all.

Naser Ezaz Bijoy, president of the Foreign Investors Chamber of Commerce and Industries, recommended reducing the tax rate imposed on the internet and smartphones.  Emphasising a cashless society to increase the scope of taxes, he called for an increased tax-free threshold.