Businesses have called for urgent tax reliefs in the upcoming budget for the fiscal 2021-22 to heal their pandemic wounds.
Instead of imposing taxes afresh to increase revenue collection, they have demanded cash assistance along with exemptions from VAT and tax on products and services.
Businesspeople have placed a plethora of proposals before the National Board of Revenue, seeking to mainly lower corporate tax rates by 5%, withdraw a minimum 2% turnover tax, VAT refunds on all products and services, remove the cap on companies' promotional expenses, revoke duty on raw material imports for industries, tax holiday facility for setting up new industries and easing financial burdens.
The NBR, which had sought proposals from business associations, economists and think-tanks to formulate a budget for the upcoming fiscal year amid the pandemic, however, thinks big cuts in taxes are not possible.
More than 120 organisations, including the Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka Chamber of Commerce and Industry (DCCI), the Centre for Policy Dialogue (CPD), had talks with the revenue board and proposed tax cuts.
However, some institutions have advocated for expanding the tax net through reforms in the revenue sector.
The country's exports and imports also plummeted in the last one year due to Covid-19 and all trades on the domestic market are also witnessing a downtrend. Over 10 lakh expatriate workers returned home. Several lakh people have lost their jobs at home and abroad.
Industrial entrepreneurs have been hit hard by the raw material crisis and subsequent disruption in production. The second wave has emerged as a cause for more concern for them.
In such a situation, businesspeople are demanding tax cuts fearing an even more difficult situation ahead.
Economists think only a tax relief is not enough, there is also a need for reforms in the tax structure and reducing tax evasion.
Dr Ahsan H Mansur, executive director of Policy Research Institute, said the government will have to chalk up a plan to rejuvenate the economy, rather than going for fresh taxation.
But he thinks that increasing revenue collection is a very difficult task.
The NBR now needs to strengthen its tax collection regime by facilitating online revenue collection as well as curbing tax evasion.
The revenue board should also focus on stopping capital flight, he pointed out.
The government will have to find new sectors to increase revenue collection. It is also essential to ease imports of necessary raw materials meant for domestic production, he also said.
NBR Chairman Abu Hena Rahmatul Munim said all the demands made by businessmen are not acceptable.
In different discussions with business representatives, Abu Hena said ensuring that money reaches people is the biggest challenge at this pandemic time. People will not have money if government development projects and non-development expenses stop. So the NBR will have to earn more. There is no opportunity for big tax cuts in taxes when it is necessary to boost revenue collection.
Demand for corporate tax cuts
Corporate tax rates in Bangladesh are higher than in neighbouring countries.
The Bangladesh Investment Development Authority (Bida), the Bangladesh Economic Zones Authority and almost all business organisations have proposed bringing down corporate tax rates by 5% over the next five years to draw in foreign investment as well as to aid local businesses.
Bida director Ariful Hoque said corporate tax rates in Bangladesh are higher than in neighbouring countries. That is why foreign investors are not encouraged to invest in Bangladesh even after offering various incentives. Local entrepreneurs are also struggling to survive in the competitive market.
Reducing corporate tax rates in certain sectors will increase investment, he added.
Seeking a cut in corporate tax in its proposal to the NBR, Rupali Chowdhury, president of the Foreign Investors' Chamber of Commerce and Industry, said corporate tax rates now range between 25% and 45% in eight categories. General companies have to pay 32.5%, merchant banks 37%, tobacco product manufacturers 45%, and mobile phone companies have to pay up to 45%.
On the other hand, the corporate tax rate is only 20% in Vietnam and Thailand, 24% in Malaysia, 25% in Myanmar and Indonesia, and 17% in Singapore. The rate is 30% in neighbouring India while it is 28% in Sri Lanka.
Noting that Bangladesh's higher tax rates compared to competitor countries are discouraging investment, she suggested reducing it gradually.
On the other hand, the SME Foundation has proposed fixing the corporate tax rate for small and medium enterprises at 10%.
Call for withdrawal of minimum tax
The repeal of the law that mandates the minimum tax payment for companies is another major demand of businesspeople. Even if a company incurs a loss, it has to pay a 2% minimum tax on turnover, making it difficult for loss-making small and new companies to survive. The MCCI has termed it discriminatory.
Adeeb Hossain Khan, member of the Budget Committee of MCCI, said in this case, the minimum tax payment requirement should be withdrawn.
Traders say a big portion of the 1,46,000 currently registered companies are loss-making ones. Many companies cannot make profits in the initial few years after starting a new business. In this situation, it is a burden for everyone to pay taxes without making a profit.
Mohsina Yasmin, executive member at Bida, said, "The minimum tax is a barrier to investment in Bangladesh and this needs to be changed. We have proposed forming a coordination committee to decide necessary changes in the tax structure."
It is important to give tax relief to traders at this pandemic time. For this, everyone has to work together, she added.
Tax-free turnover limit proposed at Tk50 lakh
Currently, retail sales up to Tk30 lakh a year enjoy a relief from paying turnover tax. Businesses that register an annual sale of Tk30-80 lakh pay 4% in turnover tax. And if the annual sales exceed Tk80 lakh, the business entities have to pay value-added tax (VAT) on products.
To provide the small businessmen with a relief, a proposal to raise the tax-free turnover ceiling from Tk50 lakh to Tk1 crore has been made to the NBR in the next budget.
Apart from the country's top business organisations, SME Foundation has termed the policy support "very urgent" for its several lakhs of entrepreneurs.
The Bangladesh Shop Owners' Association also came up with the same demand. President of the association Mohammad Helal Uddin said, "There are many small traders who do not make 4% profit. But if they have to pay 4% in turnover tax, then it becomes impossible to survive."
MCCI, DCCI and BCI propose more than 300 proposals
The NBR is yet to receive the budget proposal from the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).
However, the country's leading trade bodies such as the MCCI, the DCCI, the Bangladesh Chamber of Commerce and Industry (BCCI) and the Chattogram Chamber of Commerce and Industry (CCCI) have concluded pre-budget parleys.
In its talks with the NBR, the BCI has proposed 126 changes for the upcoming budget.
Apart from corporate tax and minimum tax withdrawals, the BCI demanded formation of a special fund for new entrepreneurs, keeping at least 5% research and development spending of the companies tax-free, reducing taxes on dividends by 10%, making refund period one month, reducing import tax on capital machinery to 1% and five-year tax waiver on greenfield investment in the capital market.
Like the BCI, the DCCI also came up with a proposal with more than 100 reforms in VAT, income tax and customs regulations.
The trade body proposed a reduction of the 20% tax on corporate dividend income to 10%, tax waiver on research and development spending, halving 0.5% tax on total income of above Tk3 crore for businessmen, increasing the tax-free individual income limit and making the entire income tax system digitised.
DCCI president Rizwan Rahman said businessmen are struggling to survive due to the pandemic fallout. At this time, it is very important to reduce the corporate tax and withdraw the minimum tax.
He said DCCI also proposed to raise the turnover tax-free ceiling to provide the small traders with a brief relief.
In the meantime, MCCI also proposed more than 100 reforms in the next national budget, such as 0.5% taxation on company promotional spending and reducing the spending limit for royalties and technical fees.
Manufacturing entrepreneurs also want easing of fiscal policy
Apart from policy support proposals through the chambers, manufacturing sector organisations have separately demanded for tax-cuts.
Citing the virus fallout on exports, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has demanded cash assistance and keeping the tax rate at source at 0.25%.
Leather and footwear businessmen have demanded a general bonded warehouse facility for all of them to survive the huge losses.
Bangladesh Mobile Phone Importers Association President Ruhul Alam Al Mahbub said they requested the NBR to continue the existing tax exemption on mobile manufacturing.
President of the Bangladesh Television Manufacturers Association Md Sohel Khan said they proposed the revenue board to reduce tax on television parts and cabinets to 15% from 25%.
Shahadat Hossain, president of the Bangladesh Electrical Association, sought import duty exemption for electrical parts and machinery.
The Association of Mobile Telecom Operators of Bangladesh (AMTOB) proposed Tk200 tax withdrawal on each mobile phone SIM.
Despite being an industry, the newspaper sector is not getting the same benefits as others, noting so, the Newspaper Owners Association of Bangladesh (Noab) has demanded duty-free import of newsprint.
In the meantime, plastic product producers and exporters demanded withdrawal of income tax on plastic recycling, reduction of advance income tax on exports and withdrawal of advance income tax on raw material imports.
Transport owners demanded exemption of existing VAT on air-conditioned buses and AC launch cabins. They have also made several proposals in income tax, VAT and customs, including reduction of duty on tyre imports and ban on three-wheeler imports.
Apart from Tk200 crore cash allocation in the upcoming budget, women entrepreneurs came up with demands including 4% VAT on beauty parlours, food and local item sales.
Cement makers demanded repeal of 3% advance income tax and 3% tax on supplies in the next budget.
Restaurant Owners' Association Secretary General Imran Hossain said they proposed reducing VAT on customers to 5% from the existing 15%.
Citing declining global fuel consumption, the Bangladesh Reconditioned Vehicles Importers and Dealers Association (Barvida) has sought tax exemption on electric car imports.
Ceramics product manufacturers have demanded the withdrawal of supplementary duty on locally made tiles and sanitary products. They also proposed reducing import duty on raw materials for ceramic products to 5%.
MA Mubin Khan, president of the Bangladesh Private Medical College Association, demanded the withdrawal of the existing 15% income tax terming the sector non-profit.