- Bepza proposes 2% annual cut in corporate tax rates
- Beza wants advance tax reduction to 2% from 4%
- Realtors seek cut in registration costs to 7% from 10-12.5%
- Cement manufacturers for cutting duty on clinker imports to 5%
- Steel producers elimination of 4% advance tax
Investment development and EPZ authorities have proposed simplifying the existing tax regime to attract foreign investment as well as help the local businesses.
In a pre-budget discussion with the National Board of Revenue (NBR) on Tuesday, they termed the upcoming budget for fiscal 2021-22 a budget for post-pandemic economic recovery.
In another discussion with the revenue board, businesspeople, such as realtors and cement steel and drug manufacturers, demanded an exemption from and a reduction in tax to a tolerable limit, saying it will take time to heal their pandemic-caused financial wounds.
The Bangladesh Investment Development Authority (Bida), the Bangladesh Economic Zones Authority (Beza), the Bangladesh Export Processing Zone Authority (Bepza), the Bangladesh Hi-Tech Park Authority, and the Business Initiative Leading Development took part in the discussion in the NBR conference room.
Mentioning that a cut in corporate tax is essential to attract foreign investment, Bida Executive Member Mohsina Yasmin said corporate tax rates in Bangladesh are higher than in neighbouring countries.
That is why foreign investors cannot be attracted to invest in Bangladesh even after offering various incentives, she mentioned, adding that reducing corporate tax rates in certain sectors will increase investment.
"We want to form a research team with the help of the NBR so revenue collection does not fall because of tax reduction. The team will work on which sector is in need of tax exemption. The team will also make a list of potential investments even if no exemption is given."
NBR Chairman Abu Hena Md Rahmatul Muneem also supported the proposal to form a committee to increase investment and help the government in revenue collection without thinking only of a tax cut.
Mentioning that corporate tax rates in Bangladesh is very high, Bida director Ariful Hoque said at present 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 is only 20% in Vietnam and Thailand.
Noting that higher tax rates than in competitor countries are discouraging investment, he suggested reducing it gradually.
Bepza has proposed reducing corporate tax rates by 2% per annum as well as repeal the law that mandates the minimum tax payment for companies.
Bepza Executive Director Abdul Aziz said even if a company incurs a loss, it has to pay a minimum tax, making it difficult for loss-making companies to survive. In this case, the minimum tax payment requirement should be withdrawn.
Beza also proposed reducing advance VAT on imports of raw materials to 2% from the existing 4% for the companies, which have invested in economic zones, alongside continuing their tax exemption facility on goods and services.
Taking part in the pre-budget discussion, Hosne Ara Begum, managing director of Bangladesh Hi-Tech Park Authority, said, "Many foreign companies are coming to invest in the hi-tech parks. But they are going back at the last minute as they are sceptical of getting any tax benefits. They say we will sign a contract only if we are assured of getting tax benefits."
Businesses demand tax relief
Real Estate and Housing Association of Bangladesh (REHAB) President Alamgir Shamsul Alamin requested the NBR to reduce registration costs for real estate assets to 7% from the existing 10-12.5%.
For the sake of a much-needed real estate secondary market, he also requested that the repetition of the entire registration cost be stopped when a property is resold. And, he suggested collecting a mere 3.5% fee against the ownership transfer.
The association of realtors also sought the opportunity to invest undisclosed money in the sector for the coming years to discourage capital flight.
Alongside demanding VAT reduction to 1.5% from 2-4.5%, they also sought a cut in income tax of real estate companies by more than two-thirds, which is collected based on the sales of per square foot space.
Relaxation in the real estate's gain tax, suppliers' VAT and taxes at source and special refinancing scheme for housing and tax exemption for developing non-urban areas were among other REHAB proposals for the upcoming budget.
Meanwhile, Bangladesh Cement Manufacturers Association President Alamgir Kabir requested a cut in customs duty on imported clinkers to 5%, which is now effectively more than double.
The association also demanded the elimination of 3% advance income tax and 3% tax deduction at source alongside refunding the industry's adjustable advance income tax worth over Tk1,000 crore.
Bangladesh Steel Manufacturers Association President Manwar Hossain proposed eliminating 4% advance tax, VAT deduction at source, and a provision for minimum tax alongside relaxing TAX deduction at source, retailers' VAT, and import duty.
"It looks like we are breathing, but internally we are damaged," he said, mentioning that the industry would take 3-5 years to heal the financial wound of 2020.
Supporting other construction sector players, Bangladesh Auto Re-Rolling and Steel Mills Association representative Manzur Ahmed said the advance tax is hurting industries.
All the speakers said raw material prices and freight charge escalation are making their job to build Bangladesh tougher.
Manzur Ahmed requested more public opinion before the budget and also more communicating the Finance Bill.
Both traditional and auto brick manufacturers demanded VAT relaxation while iron and steel importers and merchants requested a reduction in import duties against raw materials for local industries.
Bangladesh Iron and Steel Importer Association Vice-President Amir Hossain Noorani said many industries are importing capital machinery almost without any duties, while local manufacturers of such machinery face as high as a 67% duty on the import of metallic raw materials meant for producing those.
The country's pre-fabricated steel building manufacturers are facing the same reality as their raw materials face high import duties while importers of finished products are enjoying lower duty, said Steel Building Manufacturers Association of Bangladesh's representative Md Rashed Khan.
Bangladesh Association of Pharmaceutical Industries representative Ali Nawaz requested an exemption from taxes against all the expenses by local pharmaceutical companies for manufacturing rights of various generic drugs until 2025.
Because after 2025, when Bangladesh would become a middle-income country, local generic drug manufacturers will have to pay patent or brand owner foreign companies a lot against a number of drugs.
The country's burgeoning pharmaceutical industry too submitted their detailed proposal to the NBR on what they need to excel in the coming days.