• Monday, Oct 25, 2021
  • Last Update : 07:46 pm

MCCI seeks abolition of limits in promotional expenses for FY22

  • Published at 08:52 pm May 23rd, 2021

The maximum limit in the promotional expense for businesses had been fixed at 0.5% of business turnover through the Finance Act 2020

The Metropolitan Chamber of Commerce and Industry (MCCI) has proposed the government to abolish the limits set in promotional expenses of businesses for the budget of the 2021-22 fiscal year. 

The maximum limit in the promotional expense for businesses had been fixed at 0.5% of business turnover through the Finance Act 2020.

In a proposal submitted to the National Revenue Board (NBR), the MCCI suggested abolishing Section 30 (P) of the Finance Act which introduced the maximum limit. 

If abolished, the promotional expenditure sector will have no limits on being considered as allowance expenses.

Also read - Speakers: Need for framing pandemic-focused budget for FY22

Under the act, promotional expenses exceeding the proposed cap is listed as income and therefore companies have had to pay taxes on the expenditure since FY21.

Fast-moving consumer goods (FMCG) and similar industries spend between 5% and 10% of their turnover on promotional activities, according to the MCCI. Therefore, proposed cap on such expenditures means that the cost of doing business increased.

This move has also forced companies to cut down on promotional activities, according to industry insiders.

For Bangladesh, considering the profit rate from 2% to 30%, the effective tax rate has increased significantly, ranging from about 6% to 89%.

To avoid this burden of additional taxes, businesses have reduced promotional activities at a significant rate which can hamper business growth.

Moreover, according to MCCI proposals to the NBR, this prevents every industrial organization from expanding its business. Countries with comparable economies like India, the Philippines, Indonesia, Pakistan, Sri Lanka, etc., do not have such a provision.

From a foreign direct investment (FDI) perspective, the law discourages investment by potential domestic and foreign investors. 

In that case, foreign investors are more likely to give priority to neighbouring countries than to Bangladesh, and neighbouring countries have recently reduced their corporate tax rates to attract FDI, the MCCI said.

Also read - Budget FY22: FBCCI seeks reforms in banking system

Manjeno Raihan Khan, the Chief Operating Officer of Concito PR, stated: “MNCs and FMCGs around the globe have a very subjective expenditure in terms of promotion that ranges from a mere product launch to the launch of big campaigns targeted towards the masses.”

With the advent of digitization and the evolution of the communication industry, the number of tools in the promotion sector has increased with consumers consuming information from diverse platforms, he added. 

“This discourages businesses as the cap prohibits them reaching their maximum potential in terms of the target market,” said Manjeno.

The MCCI has also proposed reducing corporate tax, tax deducted at source, and withdrawal of supplementary duty or imposition of minimum 5% duty on products of public consumption except those that endanger public health, at the local supply level.

Facebook 56
blogger sharing button blogger
buffer sharing button buffer
diaspora sharing button diaspora
digg sharing button digg
douban sharing button douban
email sharing button email
evernote sharing button evernote
flipboard sharing button flipboard
pocket sharing button getpocket
github sharing button github
gmail sharing button gmail
googlebookmarks sharing button googlebookmarks
hackernews sharing button hackernews
instapaper sharing button instapaper
line sharing button line
linkedin sharing button linkedin
livejournal sharing button livejournal
mailru sharing button mailru
medium sharing button medium
meneame sharing button meneame
messenger sharing button messenger
odnoklassniki sharing button odnoklassniki
pinterest sharing button pinterest
print sharing button print
qzone sharing button qzone
reddit sharing button reddit
refind sharing button refind
renren sharing button renren
skype sharing button skype
snapchat sharing button snapchat
surfingbird sharing button surfingbird
telegram sharing button telegram
tumblr sharing button tumblr
twitter sharing button twitter
vk sharing button vk
wechat sharing button wechat
weibo sharing button weibo
whatsapp sharing button whatsapp
wordpress sharing button wordpress
xing sharing button xing
yahoomail sharing button yahoomail