FICCI terms proposed budget corporate-friendly

The Foreign Investors’ Chamber of Commerce and Industry (FICCI) has termed the proposed budget corporate-friendly.

“We would like to express our sincere gratitude and thanks to the Prime Minister and Finance Minister for delivering such a pragmatic budget in this difficult circumstance,” said a press release on Saturday (June 11)  

The release added: “We are very happy to observe that some of the FICCI’s recommendations were considered in the current Budget, which will definitely have some positive impact on the businesses as well as attract FDI.”

Following are the chamber’s assessments:

The projected Annual Development Programme (ADP) of Tk 2,46,066 crore is targeted to facilitate the quick recovery of the economy despite different external shocks and turmoil global supply chain. The proposed budget aimed for a GDP growth of 7.5 percent and an inflation rate of 5.6% for the upcoming fiscal year.

The Chamber feels that the GDP growth target of 7.5% is achievable provided that the among others GDP- Investment ratio increases to the expected level. The Chamber also appreciates notable allocation for the health sector, and education, however, concerned about the reduced allocation for the key mega projects, which will result in a slow implementation as well as raise the total cost of the project. We feel instead of reducing the allocation in mega-project, Government could concentrate on enhancing the quality of spending, which could bring further efficiency as well as generate employment. It also expresses concern about bridging the deficit from banking sources which may tighten the liquidity situation.

We appreciate the government’s initiative to increase the budget allocation in the Health, Education, and Agriculture, Food & Fisheries sector, which we believe will make a significant positive impact on the socio- economic development of the country. The highest allocation to the Social Security safety net is a great initiative as the current volatile situation created immense challenges for the poor and middle-class people to ensure their livelihood, however, transparency, accountability, and capacity of the implementing authorities need to be ensured.

The Chamber particularly appreciates the following proposals, made in the proposed budget:

• Corporate tax rate for certain listed and non-listed companies will be reduced by 2.5% subject to certain conditions. Corporate tax reduction has become a consistent change in tax policy which is welcoming. However, upon considering the current economic condition and infrastructure, the proposed cash transaction limit must be increased.
• Tax deduction at source from payment to raw material supplier will be reduced to 4% from 7% which will minimize the gap between statutory tax and an effective tax rate of those suppliers. We still believe TDS should not be made applicable for the supply of raw materials.

• The limit for perquisite has been increased from Tk 5.5 lac to 10 lac which is welcoming although this is double taxation.
• Reduced tax rates @ 10/12% have been introduced for all general industries exporting goods and services. Insertion of the definition of export will reduce the complexities of export of goods and services. We also believe that this sort of export-friendly initiative will bring export diversification and bring down the trade deficit with other countries.
• Amendment in the definition of amalgamation and clarification in the tax implications of (a) capital gain arising from amalgamation, (b) carry forward of accumulated loss, and (c) unabsorbed depreciation will position our law at the international level which is long cherished demand of business fraternity.
• Thanks to NBR for including the concept of a start-up sandbox in the ITO, 1984. Start-up businesses will now be exempt from the bindings of all other types of reporting except submitting an income tax return, no disallowance for deduction of tax, and limits imposed in section 30 of the ITO, 1984. Start-ups will allow to set off and carry forward losses over a period of nine years are a very good initiative of the government to encourage the Start-ups.
• We appreciate the following changes in the VAT and Supplementary Duty Act:

1. Clear definition of identical and similar goods
2. Business-friendly provision that an entity having one production facility and depot(s) will be entitled to central registration which will reduce the cost of doing business
3. An entity can directly transfer raw material from the port to the contract manufacturer
4. VAT officials cannot impose a penalty for unintentional error and reduction of penalty from 100% to 50 percent and a maximum of 100 percent.
5. An entity may claim VAT deducted at source as decreasing adjustment up to 4 tax periods from 2 tax periods.
6. VAT officials cannot charge simple interest for more than 24 months

Apart from the above, we have the following concerns, which will believe, if not addressed, will have an adverse impact on the business and investment:

• An entity is required to pay WPPF as per the provision of labour law. It is not a dividend rather an expense, a portion of which is also payable to the government. It is an expense not at the discretion of the company but a compulsion. Moreover, an individual is required to pay tax on it for an amount exceeding Tk 50,000. Disallowing such a legitimate business expense will increase the tax burden of the compliant businesses.
• No significant changes have been made in section 56 of the ITO, 1984 except for bandwidth and other payments. The current TDS rate in section 56 is extremely high which should have been rationalized.
• Considering the overall existing macroeconomic scenario, increasing inflation rate, etc. we feel the Tax ceiling for individual should have been increased, which has not been changed for the last two fiscal periods.
• Tax officer may penalize a company for an amount of Tk 50 lac during TDS verification for lack of cooperation. NBR is planning to digitize the TDS process through eTDS system wherein such an imposition of penalty might act as a deterrent. We would like NBR to take a comprehensive IT strategy

that will ensure digitization of filing of Corporate tax returns, audit selection by NBR, all notices to and from NBR, E-Assessment, E-Appeal, E-Tribunal, Internal process within the circle, zone, and NBR.

• Now every e-TIN holder will be required to display their e-TIN submission proof in public. Tax return acknowledgment slip or tax certificate contains confidential information like income, Tax payments. Business confidentiality cannot be maintained.
• Imposition of VAT @5 percent on broadband internet and handset trading will increase prices of internet and handsets, which will adversely affect the Government’s vision of Digital Bangladesh.
• We also noticed some of the major concerns like rationalization of inadmissible promotional expenses provision or minimum tax provision raised by all Chambers including FICCI have not been resolved.
• The budget proposed amnesty on the declaration of foreign assets in tax return by paying tax at different rates. Whilst we do not encourage this kind of amnesty, but as the FM mentioned to bring the undisclosed monies from abroad back to the country to shore up reserves has a reason we appreciate. However, out of the three options, the one where cash and equivalents are brought back to Bangladesh seems to be the only one that supports the intention. Other two options where Moveable and Immoveable properties are kept outside of Bangladesh may well go against the stated objective, in fact, these two may result in more money going out of the country.

Chamber would like to extend its continued support to the Govt. to work together toward the development of the country by developing a tax-friendly environment.

The Foreign Investors’ Chamber of Commerce & Industry (FICCI) is the apex chamber of multinational companies doing business in Bangladesh.

FICCI is affiliated with the Federation of Bangladesh Chambers of Commerce & Industry (FBCCI) as an ‘A’ class Chamber and is a founder member of the Bangladesh chapter of the Paris based International Chamber of Commerce-Bangladesh (ICC-B).