FE REPORT |
February 10, 2022 9:28:25 a.m.
February 10, 2022 12:27:23
Elite chamber urges government to overhaul Bangladesh’s corporate income tax as companies are denied benefits from rate cuts due to excessive ‘spending denial’ and ‘tax deducted at source”.
In a pre-budget meeting on Wednesday with the Revenue Council, the Dhaka Metropolitan Chamber of Commerce and Industry (MCCI) said the corporate income tax liability finally stands and pleaded for overhauling taxation according to regional standards to allow businesses to play neck and neck with competitors, especially in open market trade after Bangladesh’s exit from LDCs.
Chamber leaders argue that setting corporate tax rates and overall tax structures in line with regional competitors is imperative for a sustainable exit from LDC status with trade preferences.
“Effective corporate tax rates in the country are still higher than in neighboring India and Vietnam despite a 5% tax reduction over the past two years,” MCCI said during the new preparatory discussion on the budget of the National Board of Revenue (NBR) premises in Dhaka.
The discussion was organized by the Government Revenue Authority in collaboration with other stakeholders and policy makers ahead of the development of the budget for the financial year 2022-23. NBR Chairman Abu Hena Md Rahmatul Muneem presided.
Addressing the event, MCCI Chairman Saiful Islam said the government should reduce effective corporate tax as higher effective tax rates affect both domestic and foreign investment in the country.
“Unauthorized spending and TDS are so high in the country that traders are not enjoying the benefits of the 5.0% tax reduction,” he said at the meeting, adding that in the In the case of limited companies, the corporate tax rate is 22.5 percent. percent, but in some cases it varies from 40 to 50 percent.
He said that Bangladesh should be ready, especially with fiscal regimes, to counter the loss of preferences after graduation from LDCs.
Echoing the incumbent president’s views, former MCCI chairman Syed Nasim Manzur noted that if Bangladesh is to sustain export growth, it must compete with Vietnam and other neighboring countries.
“We can only achieve this if Bangladesh can reduce the cost of doing business and increase efficiency,” he said.
He calls the unpredictability of different tax rates detrimental to export growth.
Noting that export tax rates have fluctuated over the years, the leading businessman is of the view that such practices should be stopped.
He urged the BNR to end discrepancies in export tax rates for different sectors.
“There should be predictability and tax rate for all export sectors, and we can assure you of exports worth $100 billion,” he told the NBR chairman .
He asked the NBR to also apply incentives to TDS.
Syed Nasim Manzur urged the tax administration to encourage production-based manufacturing like in India.
Another former MCCI chairman, Nihad Kabir, said the NBR should now work on how the country’s fiscal policy should play its role after graduation in 2026.
“NBR should form a research cell to work on this issue starting this year,” she says.
She believes that the current low tax-to-GDP ratio is not suitable for today’s Bangladesh, now on a higher development trajectory thanks to a change in status.
Ms Kabir said the NBR should tax untaxed businesses instead of pressuring businesses that have already paid taxes.
She urged the tax administration to introduce a mechanism for harassed businesses to lodge complaints anonymously.
While placing the proposals and suggestions, the MCCI Chairman noted that the current law empowers the “Office of the Comptroller and Auditor General of Bangladesh” to investigate company accounts, tax receipts or tax refunds.
He urged the BNR to reconsider the provision of a new audit by the CAG despite the disposition of tax returns to the income tax department.
“It increases merchants’ business expenses, including waste of money and time,” he said.
The MCCI requested the NBR to introduce the provision of an online hearing at the stage of tax assessment, appeal, tribunal and alternative dispute resolution (ADR).
“It takes time. If the case is enshrined in law, time will be saved on the one hand and attendance at the hearing will be ensured on the other,” said the president of the chamber.
The Chairman of the NBR pointed out that there are still valid reasons to reduce the current corporate tax rate.
The MCCI recommended that any modification of the budget law be effective on July 1 of the following year.
“It will then be possible to avoid many hassles regarding the annual general meeting and the approved financial statements of the shareholders,” says the MCCI proposal.
In his speech, the NBR chairman assured trade body leaders that every proposal from the chamber would be carefully considered and scrutinized.
He admitted that there are still reasons to reduce corporate tax rates.
However, he said such a decision could not be made given the risks involved in collecting revenue.
Besides the leaders of the MCCI, senior officials of the NBR were also present at the program.