Higher compliance can widen tax net: BAT MD

With a legacy of 110 years, BAT Bangladesh is one of the largest multinational companies operating in Bangladesh. The company's Managing Director Shehzad Munim, who was president of the Foreign Investors' Chamber of Commerce & Industry, recently spoke to The Business Standard. 

Shehzad talked about the country's business climate, the Covid-19 crisis, foreign direct investment, BAT Bangladesh's operations and more.

The Business Standard: How has the overall business climate been for the last one year?

Shehzad Munim: Like most businesses, we too, struggled initially to navigate through the uncertainty that prevailed during March/April last year. Our objective was simple – to protect our people from any economic burden on top of the pandemic. The message shared within our company and with our distributors and suppliers was that no one would be terminated, and their salaries would not be cut until the business suffered substantially. I am happy to say that we have been successful in keeping our words.

TBS: You must have been a keen observer of how the government has handled the unique Covid-19 crisis. What are your thoughts about the government's initiatives? 

SM: Our government was very proactive from the beginning and did excellent work considering the limited resources it had. Achieving a GDP growth of almost 5-6% along with a healthy inflation rate is simply amazing amidst a global pandemic. The timely disbursement of stimulus packages played a big role to ensure large industries stayed afloat and jobs were retained. 

However, it is true that funds from the stimulus packages did not reach smaller businesses. It must be mentioned that the situation was unique to all governments of the world and Bangladesh was no different. Overall, we did a fairly good job in tackling the economic impacts of the pandemic to date.

TBS: The last budget came during the pandemic as is the case for the upcoming one as well. How do you think this year's one would fare? What do you think this budget should look like? 

SM: Last year's fiscal budget was a pandemic-centric budget and the same is expected for the coming one. The primary objective is to protect the economy from any shock and allocate enough funds to ensure vaccination of all and upgrade the healthcare system to cope with the ongoing challenges. Reviewing the macroeconomic numbers, it is obvious that the last budget was effective, so a continuation of the stimulus packages and protective measures is necessary. 

The change we would like to see is that long-term plans be reflected and communicated in the annual budget. As an example, we are hearing that the corporate tax will be reduced yet again in this budget, which is great, but can we expect to hear that it is part of a five-year long-term plan of reducing the corporate tax rate down to say 20% or 15% to be competitive with Singapore or Hong Kong or even Vietnam? 

TBS: The Bangladesh government still struggles with tax revenue generation. How can we expand the tax net effectively? 

SM: There is no other option but to automate the taxation system to widen the tax net. Currently, the ones who pay taxes are taxed more. 

Businesses, which provide full disclosure, should not have to pay any Advance Trade VAT and Advance Income Tax. Moreover, we can revisit the single VAT rate issue. One would argue that 15% VAT is high for a nation with a substantial number of businesses that need to become compliant. 

Any VAT rate that is lower than 15% is in essence not VAT but some other tax as businesses cannot take rebate against it, which makes the effective tax rate much higher. Ensuring that all in a nation of 16 crore people are tax compliant is a mammoth task, so we need to think of tax rates that people will be willing to pay and choose a much easier path of compliance. 

TBS: You served as president of the Foreign Investors' Chamber of Commerce & Industry (FICCI) Bangladesh. What do you think of the current FDI climate? And how to make it better? 

SM: There is room for improvement in terms of branding our country. To attract foreign direct investment, we must improve our communication by targeting specific countries. There needs to be an effective collaboration between the public sectors and the various chambers of commerce. FICCI members act as ambassadors to attract potential foreign investors and they need more opportunities to talk about their success in doing business in Bangladesh.