Corporate tax cuts to boost emerging sectors: entrepreneurs

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Equal tax benefits for emerging export-oriented industries in the country will bear fruit for the economy, according to industry insiders.

Like the apparel industry, export earnings from the home textile, leather goods, jute and agriculture industries topped the $1 billion mark in the first 10 months of the year. exercise in progress.

The country’s IT and pharmaceutical industries are also doing well with growth of 20-25%. Moreover, the plastics, toys and light engineering sectors have also shown promising results in the global market.

The entrepreneurs said the corporate tax cut mandated in the draft budget for the fiscal year 2022-23 will benefit all these industries.

Dhaka Chamber of Commerce and Industry (DCCI) President Rizwan Rahman said, “We have long called for equal tax benefits for all sectors. corporate bond and tax facilities. »

In the proposed budget, the tax rate of other export-oriented businesses like ready-to-wear garments has also been reduced to 12% in a bid to improve the competitiveness of Bangladeshi products in the global market. .

And if a factory is environmentally friendly, companies will have to pay at the rate of 10%.

National Revenue Board member Sams Uddin Ahmed said, “The applicable tax rate for ready-to-wear garments is 12% for general factories and 10% for green factories. All types of export industries now enjoy the same benefits. . It means they can invest again.”

However, entrepreneurs in several sectors fear a loss since the withholding tax on exports has been reduced from 0.50% to 1%.

Abdur Razzak, chairman of the Bangladesh Engineering Industry Owners Association, said the government had reduced corporate tax. But exporters will be in trouble due to an increase in withholding tax.

Light engineering is one of the country’s eight emerging export sectors. Although the industry, worth about Tk 12,000 crore, has been developed recently in the country, it has not done well in exporting due to a lack of incentives. At one point it earned over $600 million in exports, but now the revenue has dwindled. Raising the withholding tax could hurt the industry, industry insiders said.

SM Shafiuzzaman, secretary of the Bangladesh Pharmaceutical Industries Association, said that “unconditional exemption from corporate tax rate on export earnings would play a vital role in the development of the pharmaceutical industry.”

With a growth of about 25%, some 53 companies in the country exported drugs worth Tk 1,800 crore last year. Our medicines are exported to about 142 countries in the world. This corporate tax exemption opportunity will further enhance the development of Bangladesh’s pharmaceutical industry in the global market, he said.

Currently, Beximco, SKF, Incepta, ACI and Square also export Bangladeshi drugs to the US market. Square and ACI are also setting up factories in Africa and America.

According to officials of these organizations, the money that will be saved through the corporate tax exemption will create new investment opportunities.

The agri-food sector has more potential

The agribusiness sector passed the $1 billion mark in export revenue in the last financial year despite the coronavirus pandemic. Even in the first ten months of the current fiscal year, the agricultural processing sector has surpassed $1 billion in exports and is waiting to break another record.

Kamruzzaman Kamal, director (marketing) of Pran-RFL Group, the country’s largest exporter, said entrepreneurs in the sector would be further encouraged by the corporate tax exemption.

He said that the agro-food industry has already firmly established itself in the country’s economy. Besides, this industry has also gained wide recognition in the world and Pran is leading this industry. We now export to 145 countries around the world.

He said that as a result of corporate tax cuts, large companies like ACI, Square, Akij, as well as small entrepreneurs will be able to grow.

Bangladesh is the second largest jute producer in the world, with an estimated annual production of 1.349 million tons.

Jute is also the country’s third export sector. Despite $1.17 billion in exports, the sector has been struggling for a long time for a variety of reasons.

According to jute traders, the benefits of the corporate tax exemption will not be of much use to them as most businesses in this sector are at a loss.

Mohammad Shahjahan, Chairman of the Jute Exporters Association of Bangladesh, said: “About 95% of the jute exporters in the country are at a loss, and the remaining 5% are making little profit. a permanent incentive to this industry entrepreneurs by formulating a policy for jute rather than granting corporate tax breaks.

The price of jute products has not increased as much as utility costs, including electricity and gas, have increased. As a result, it is no longer possible for anyone to do business now.

Dilip Kajuri, Deputy Managing Director of Apex Footwear Limited, said: “The corporate tax exemption will not work for exporters of footwear due to the 1% withholding tax on exports.

At present, 70% of our total profits are lost to pay 0.50% withholding tax. If we pay 1% tax, we will have no profit. Thus, corporate tax reduction is not new to us, he said.

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