Post-Covid economic downturn closed 40% of small businesses: BCI

• Entrepreneurs allege ongoing harassment by customs authorities at the port
• Businessmen highlight the burden of additional tax due to the overvaluation of imported goods
• Entrepreneurs say overvaluation also amplifies the risk of money laundering 

More than 40% of small and cottage enterprises in the country went out of business in the post-Covid era due to harsh economic conditions, said Anwar-ul Alam Chowdhury Parvez, president of the Bangladesh Chamber of Industries (BCI).

As the economic situation is not improving, the trend of businesses closing is continuing, he said at a pre-budget meeting organised by the National Board of Revenue (NBR) at its Agargaon headquarters in the capital on Wednesday (28 February).

Parvez said the chances of economic recovery this year remain low.

Speaking to The Business Standard after the meeting, Parvez said, "We did a study six months ago, through which we found that more than 40% of small and cottage enterprises have closed post-Covid. As a result, a large number of people lost their jobs. Many of those who were once entrepreneurs are now looking for work."

During the meeting with the NBR, the BCI president referred to the recent example of staff layoffs at the e-commerce platform Daraz.

Daraz Bangladesh is set to lay off more than 500 employees this week, TBS reported on Tuesday, citing company sources.

At the pre-budget meeting, Parvez also said the government did not recognise miscellaneous spending of businesses as expenses, meaning businesses had to pay taxes on those, which "doubled the pressure" on them.

"Now we have to pay more money than before," he said, adding that corporate tax has been reduced by 7.5% in three years due to various conditions imposed by the NBR but companies are not able to take advantage of it.

Traders allege customs harassment, overvaluation

Speaking at the meeting, entrepreneurs alleged that they continue to face harassment by the customs authorities at the port. Fines and port demurrage are increasing and the burden is ultimately falling on the consumer.

They also said since the assessment value of the imported goods by the customs authorities is higher than the actual value, traders are being burdened with additional tax.

Amir Hossain Noorani, vice president of Bangladesh Iron and Steel Importers Association, said, "The product whose import price is $700 is being assessed at $1,400 by customs. Hence, small industries will not be able to survive and dependence on imports will increase instead of local production."

Entrepreneurs said the overvaluation also amplifies the risk of money laundering.

MA Razzak Khan, chairman of Minister MyOne Group, said, "When importing raw materials costs $1 for the production of electronic goods, they are assessed at a $3 value, potentially leading to an outflow of dollars from the country."

He said manufacturing a refrigerator involves the use of 450 different components, and any introduction of a new component is considered a misdeclaration, subjecting the importer to penalties of up to 400%. Additionally, inspection delays can result in port demurrage charges.

Furthermore, Razzak Khan mentioned that if there are any doubts regarding the products, samples are sent to Dhaka for testing, which can prolong the process.

Abdul Momen Molla, president of the Narsingdi Chamber of Commerce and Industry, demanded a reduction of the existing VAT rate by one-third on the sale of textile goods.

The Bangladesh Association of Pharmaceuticals Industries put forward six proposals on income tax, including increasing the promotional expenditure limit of pharmaceutical companies from the existing 0.5% to 5%. Besides, it also proposed to withdraw the import duty of raw materials in this sector.

The Bangladesh Paper Mills Association has proposed reducing the import tax on raw materials for local production and increasing the tax on imports of similar finished goods.

NBR Chairman Abu Hena Md Rahmatul Muneem presided over the meeting.

Acknowledging the NBR's inability to alleviate traders' tax burdens, the NBR chairman said, "We have quadrupled the number of taxpayers in four years. Nonetheless, we were unable to reduce your tax burden to the desired degree."

"Greater revenue will be generated if imports increase. However, we do not seek that revenue. We want the local industries to flourish and are unwilling to make any decisions that could jeopardise them," the NBR chairman added.