Foreign investors in Bangladesh have urged the National Board of Revenue (NBR) to reduce the corporate tax rate for the non-listed companies for minimising the gaps between marginal and effective tax rates.
The representatives from Foreign Investors’ Chamber of Commerce and Industry (FICCI) came up with the proposal at a meeting with the NBR officials held at its headquarters in the city yesterday. NBR Chairman Nojibur Rahman chaired the meeting.
Attending the meeting, the foreign investors said: “Foreign companies have to pay an extra 15% to 20% tax, in addition to the regular corporate tax rate due to very high disallowances on account of royalty fee and excess perquisites.”
Because of the issues, the effective tax rate becomes 50% to 55% for non-publicly traded companies and therefore, Bangladesh become non-competitive compared to other markets in the world, they added
Urging the government to reduce the corporate tax rate for promoting industrialisation and employment generation through increased foreign direct investments, the chamber leaders proposed that the corporate tax rate should be reduced at 30% from the existing 35% for non-publicly traded company, and the rate for Mobile phone operator (non-listed) should be reduced at 32.5% from the existing 45%.
However, the tax rate for listed companies can remain unchanged at 25%, reads the FICCI proposal. While addressing the meeting, FICCI President Rupali Chowdhury urged the government to take necessary initiatives to gradually reduce the rates and expand its tax base with a prospective view.
“The government should withdraw the supplementary duty for local companies from the up coming budget to help the companies be familiar with the Value Added Tax (VAT) and Supplementary Duty Act, 2012, which will be come into effect from 2016,” said Rupali who is also managing director of Berger Paints Bangladesh.
FICCI budget coordinator Abdul Khalek placed a set of recommendations including reduction of advance income tax on local LC from 5% to 2% for industrial companies, cancellation of tax deduction not admissible for excess perquisites, normal depreciation rate at 50% to be allowed for any software, review on reimbursement expenses in respect of medical treatment etc.
“The government should cancel the provision for making companies liable to pay minimum tax at 0.30% on gross receipts as the provision is against the spirit of income tax and is discouraged for foreign industries,” Khalek added.
He also stressed on formation of a research center at NBR to look into the long-term impacts before enactment of any law.
Standard Chartered Bank Chief Financial Officer Imtiaz Ibne Sattar said, “3% advance income tax on suppliers and distributors needs to be withdrawn as it is troublesome for the small enterprises to pay the tax and operate the businesses on a very low margin.
He also observed that allowable limit of CSR should be increased and also should be fully tax deductable.
FICCI demanded that the allowable limit for CSR spending should be increased at Tk100 crores or 10% of taxable incomes, whichever is lower, from the existing maximum 20% of bank’s total income or Tk8 crore, whichever is lower.
Another representative from SCB M Mahmud Rana demanded that excise duty on loan account (other than deposit account) needs to be withdrawn.
Currently, all the banks are required to collect or deduct excise duty from all accounts, including loan account, as per the given slab. With this in effect, it would consequently cause double deduction of excise duty from the individual customers, who have received the loan through his/her current account/OD account maintained with bank. “So, it needs to be cancelled.”
Debabrata Roy Chowdhury from Nestle demanded that food for specialised purposes, which are used to cure diarrhea and low-weight problems of children needs a separate HS code for duty benefits, withdrawal of supplementary duty and needs customs duty reduction.
He also noted that the NBR should include the mention of ‘goods infringing IP rights’ in the list of products, which are barred to be imported in Bangladesh.
CEAT AK Khan Bangladesh Ltd representative Shahadat H Chowdhury observed that the government should provide tax holiday to the tire industry as industrial undertaking.
Nurul Alam of Banglalink demanded a reduction in the SIM Tax rate from the current Tk300 for each SIM card.
Representatives of Marico Bangladesh Ltd, British American Tobacco, Glaxo SmithKline, Unilever Bangladesh Ltd, P&G Bangladesh Ltd also placed their respective proposals on budget related issues.
In response, NBR senior member Farid Uddin said: “The revenue is not increasing due to lack of compliance culture in the country.”
The NBR has taken up reform initiatives including digitalization, integration between its all three wings and are trying to bring uniformity, with which, the state of compliance will see a development and the revenue will be increased, he hoped.
