An unfavorable taxation policy is the major barrier to the flow of foreign direct investment (FDI) into Bangladesh, representatives of local and foreign investors said on Thursday.
Kazi M Aminul Islam, the executive chairman of Bangladesh Investment Development Authority (BIDA), led the calls for a change in policy at a meeting with the National Board of Revenue (NBR).
“Businessmen grapple with more complexities over taxes than in other FDI-receiving countries,” Aminul said. “The issue will have to be addressed soon.”
In order to attract more foreign investors, Aminul said Bangladesh would have to emerge as a manufacturing hub by turning itself into a “production regime”.
The BIDA executive chairman also suggested forming a new body under the supervision of NBR, involving officials of different ministries and chambers, with a view to expediting economic development of the country as well as attracting more FDI.
“Vietnam is receiving more FDIs compared to Bangladesh,” he said. “Perspectives of economic development of the both countries are almost same except in three criteria such as Bangladesh’s position in the Ease of Doing Business Index, infrastructural facilities, and engagement skills, which should be given more attention.”
Paban Chowdhury, executive chairman of Bangladesh Economic Zones Authority (BEZA), said Vietnam does not have a separate act, nor does it have multiple entities to attract foreign investors.
“There is only a decree in force in the country (but) still the inflow of FDI to Vietnam is very high compared to Bangladesh,” he said.
“On the contrary, there are many investment promotion bodies and numerous acts and rules in this country to attract foreign investors, but it fails to attract FDI as the expected rate. We need to uncover the reason behind this.”
Hosne Ara Begum, the managing director of Bangladesh Hi-Tech Park Authority (BHTPA), said that although many proposals were received from different foreign companies expressing their interest in investing in the country’s hi-tech parks, they later withdraw their proposals citing inconsistent tax rates.
Mahbubul Alam, trustee board chairman of Business Initiative Leading Development, submitted several proposals on behalf of his organization.
“E-BIN (Electronic Business Identification Number) holders are facing numerous troubles due to the ambiguities in the VAT law,” he said.
Other attendees who put forward their proposals for improving the country’s investment climate at Thursday’s meeting included Mizanur Rahman, a finance member of the Bangladesh Export Processing Zones Authority (BEPZA).
“Investors inside export processing zones (EPZs) are suffering from various issues over taxes as there are many complexities in the tax law and the statutory regulatory orders,” he said.
“Due to these problems, many foreign investors have decided to leave Bangladesh. On the other hand, potential investors are also losing their interest in investment in the country.”
At the meeting, the representatives of the investors put forward a proposal for addressing complexities in the import of spare parts.
Presently, investors can import spare parts without paying duty if they use them for capital equipment, but they have to pay duty for importing spare parts used in the maintenance of old machinery.
In response to their demand, NBR Chairman Md Mosharraf Hossain Bhuiyan said they would include the proposal in the fiscal policy after scrutiny, and that the complexities would be addressed “soon”.
He said: “We have plans to announce tax holidays for special economic zones (SEZs), EPZs and hi-tech parks, but not the tax exemption facilities because this might create disparities for other businesses that will not get land in SEZs.”
“NBR will form an investment promotion team within a very short time to uncover and address the barriers to the FDI inflows,” he said.
The team will be comprised of an NBR member, an official of Prime Minister’s Office, and four representatives of the organizations.