The trade licence renewal tax is the same for all traders whether they are big or small, which prompted many microbusinesses to shut their doors permanently
Trade licence renewal has drastically dropped in Chattogram City Corporation as around 50,000 entrepreneurs did not renew their licences in just one year due to a six-fold increase in the fee.
Many of these businesses – mostly small ones – had to shut down operations as they did not have any income because of the 66-day general holidays in the wake of the Covid-19 pandemic.
The National Board of Revenue (NBR) on June 30, 2019 increased the trade licence renewal tax from Tk500 to Tk3,000 for Dhaka North, South and Chattogram city corporations.
Also, businesspeople alleged that the tax is discriminating as the government has set the same amount of tax for all types of businesses.
For example, a large shipbuilding company that exports ships has to pay Tk3,000 as tax for renewing their trade licence from the Chattogram City Corporation.
But, a small trader – who sells betel-nuts in front of a restaurant with a small box – has to pay exactly the same amount.
The tax also increased from Tk200 to Tk2,000 in other city corporation areas. Traders outside all city corporation areas throughout the country will have to pay Tk1,000 as trade licence withholding tax.
A lot of such businesses permanently closed their doors amid the crises, while many other entrepreneurs changed their professions in a bid to survive the impacts of the pandemic.
Speaking to The Business Standard, Chattogram Shop Owners' Federation President Saleh Solaiman said, "The trade licence renewal tax is the same for all traders, whether they are big or small. This is a discriminatory move, and it also puts a huge burden on them.
"Amid this situation, the pandemic has only added to the traders' sufferings. The indiscriminate imposition of tax not only increased the cost of doing business for traders, but it also added to the difficulties they face due to bureaucratic red tape and paying bribes."
Md Harun, who owns a small food cart in the Kapasgola area, said, "I used to make a living by selling food items every evening. I have been struggling to bear the expenses of my five-member family since I stopped selling food items due to the Covid-19 outbreak.
"I will need at least Tk5,000 to renew my trade licence, which is now a big burden for me," he said.
Commenting on the issue, Chattogram City Corporation's Chief Revenue Officer Mofidul Alam said, "To renew their trade licence, microbusinesses such as a betel-nut trader or a food cart vendor will have to pay Tk3,575, including Tk3,000 tax to the NBR and Tk500 registration fee to the city corporation and Tk75 as VAT (value added tax).
"Due to the Covid-19 crisis, paying such an amount of money has become a burden for them."
He continued, "Businesses remained closed for around three months amid the pandemic. Many microbusinesses ate up their capital [during that time] and now cannot resume their businesses. As a result they could not renew their trade licence.
"For this reason, we are not putting any pressure on them. However, the affluent businessmen have renewed their licences on time."
In the FY2015-16, there were 94,857 trade licences in the Chattogram City Corporation. In the last five years, another 61,130 business entities took trade licences from the city corporation, which should have taken the total number to 155,987.
But, 83,479 business entities did not renew their trade licences in the last five years, causing the city corporation to lose around Tk115 crore of revenue from the sector, said sources.
Professor Muhammad Sekander Khan, economist and vice chancellor of the East Delta University, said, "Fixing the same amount of tax for all type of businesses is harming the microbusinesses.
"The government should introduce a tax policy that will save microbusiness, and encourage them too. The current policy for renewing the trade licence does not go with the existing tax principles."
For operating a business, the trader has a legal obligation to get a trade licence. Depending on the type of business, the trade licence fee at city corporation areas is between TK500 to Tk50,000, with an additional 15% VAT.
However, since the FY2019-20, all traders seeking to renew their trade licence must pay Tk3,000 to the government as tax, irrespective of the types of businesses.