The Foreign Investors Chamber of Commerce and Industry (Ficci) on Wednesday expressed its reservations about the proposed national budget for fiscal year 2023-24 and the draft Income Tax Act (ITA), 2023, both of which will have implications for local businesses and stakeholders.
They were specific about how the National Board of Revenue (NBR) wants to impose a 5% tax on gross receipts or turnover of carbonated beverage makers from the next fiscal year from the existing 0.6%.
This will result in a price hike of 30% or more. The industry already faces a customs duty in the range of 5-10% and Indirect Tax (SD + VAT) of 43.75%, which is the highest across South Asian countries, said Nasser Ejaj Bijoy, president of the Ficci.
He expected gradual withdrawal of minimum tax provisions in the new law, instead it has been increased significantly, particularly in the carbonated beverage industry from 0.6% to 5% of Gross Receipts (an eight-fold increase).
This will result in a fall in consumption and reduction in government tax collection subsequently and eventually impact FDI plans and industry employment. Therefore, the government is requested to rationalize the minimum tax to 1% to allow the industry to grow, he also said.
The increased tax on property will instigate people not to disclose the real property price in formal documents, instead they will use the Mouza rate.
“This can deprive the government of a huge source of tax, which is why property tax instead of increasing the transaction cost should be brought down substantially and Mouza value must be periodically updated to reflect the market price,” Bijoy further said.
Ficci also proposed reducing arbitrary power of officers in tax procedure and suggested implementation of comprehensive digitalization of the three wings of NBR and externally connected systems for seamless transaction.
According to the draft Income Tax Act (ITA), 2023, individuals could no longer enjoy exemptions on income from WPPF, Mutual Funds, and Dividends to certain limits.
Moreover, leave fare assistance (LFA) will now be considered as taxable income and for the purpose of tax rebate on investment, which Ficci believes lacks clarity, whether savings certificates will be considered as eligible investment.
With investment limit on mutual fund/unit fund and government securities capped to Tk5 lakh, taxing private recognized provident funds will reduce earnings of the beneficiary, while exempting government provident funds from tax was discriminatory, the Ficci chief also said.
He requested the government to revisit the provision as this will badly affect the individual's net take home wages.
Ficci also requested the government to publish an authentic English version of ITA 2023, mapping, and indexing.
Regarding environmental protection, Ficci applauded the imposition of tax on second or more vehicles, but Bijoy said that the companies and car-based businesses should be out of the proposal's purview.
The apex body of foreign investors also said that clear provision should be included in the proposed act so that the proposed ITA 2023 is effective prospectively from July 1, 2023 instead of “with immediate effect.”
“The progressive changes proposed by our government are laudable, however, the growth of the businesses and individuals may slow down with the disclosure of some of the provisions which will raise more tax burden,” he added.
The imposed VAT on locally manufactured mobile phones and increasing tax burden on loss making companies may aggravate the situation.
“We have some recommendations regarding solutions that may prevent the probable adverse situation. We hope that the recommendations are taken into consideration and allow the chamber to extend its continued support to the government and work together toward the development of the country by developing a tax-friendly environment,” he added.
Responding to a question, Bijoy said that the disruption in supply chain and inflationary pressures were global issues.
But the budget didn't give proper guidelines to tame inflation, he observed.
He also said that full automation was needed for the NBR, VAT, tax collection and Customs authorities, which would help them take everyone under tax and increase revenue.
Among other Ficci officials, Deepal Abeywickrema, senior vice-president, Engr Abdur Rashid, member of board of directors, Sazzad Rahim Chowdhury, coordinator of tariff-taxation and regulatory affairs committee, Debabrata Roy Chowdhury, member of tariff-taxation and regulatory affairs committee, TIM Nurul Kabir, executive director, and Snehasish Barua, consultant, were also present.
