Businesses for caution on cutting tax exemption in FY24 budget

While the International Monetary Fund (IMF) has asked for a reduction in tax exemptions as a condition for granting Bangladesh a $4.7 billion loan, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) urges "cautious decisions" on the issue.

The country's apex business body believes that the government should not make any decisions about tax exemptions without first verifying the importance of such exemptions, especially given the current condition of the national economy.

The FBCCI will raise the issue and propose other business-friendly measures at a consultative meeting on the budget for the upcoming fiscal 2023-24 scheduled for Thursday at Hotel Sonargaon in the capital, according to sources.

The proposals include cancelling the tariff value system, reducing import duties, and raising the tax-free income limit to Tk4 lakh.

The FBCCI will also call for the introduction of an IT and digitisation-based tax payment and refund system, as well as an automatic system for the refund of duty-tax paid in advance.

The meeting, to be jointly organised by the FBCCI and the National Board of Revenue, is considered the biggest pre-budget meeting and will be attended by Finance Minister AHM Mustafa Kamal, top business leaders, and government officials involved in budget formulation.

'Many sectors require tax exemption'

Sources said the FBCCI has included the issue of tax exemption in its budget proposal, stating that "the government will be able to generate many times more revenue by modernising the policies, management, and implementation procedures of the revenue authorities when compared to the revenue that can be made by abolishing tax exemption facilities."

Md Jashim Uddin, president of the FBCCI, emphasised the importance of government support for small and medium-sized industries in the country, as well as local or export-oriented industries.

"This practice exists in all countries of the world, including the United States," he told TBS

Currently, not many sectors enjoy tax exemption facilities in the country, he mentioned, adding, "This revenue exempted by the government can also be collected from other sectors in various ways."

Proposals to create business-friendly environment

The FBCCI plans to submit several proposals for the upcoming budget aimed at creating a more business-friendly environment in the country.

One of the major proposals is to cancel the tariff value and minimum value system currently used by the NBR in the import-export trade and instead assess based on transaction value. Additionally, the FBCCI will propose introducing a central bond system for other exporters who currently do not have access to bonded warehouses.

To speed up assessment, clearance, and all types of duties and taxes at customs houses for import and export, the FBCCI will propose opening activities related to the National Single Window to all categories of entrepreneurs. This will make it easier to submit both paper and electronic documents in accordance with the Trade Facilitation Agreement of the World Trade Organisation (WTO).

The FBCCI will also propose that an automatic system be introduced for the refund of duty-tax paid in advance, which will reduce the cost and time in export trade.

They will also propose introducing an IT and digitalisation-based tax payment and refund system, and abolishing double taxation on the same goods or transactions.

Mostofa Azad Chowdhury Babu, senior vice president of the FBCCI, believes that the NBR creates an intimidating atmosphere, which can be discouraging for taxpayers.

If taxpayers can pay taxes comfortably and easily and if a business-friendly environment is ensured, it will be good for investment as well as revenue collection, he observed while speaking to TBS.

The FBCCI may also propose to execute currency swaps in different currency exchange contracts to overcome the complications and volatility of exchange rate movements in the use of foreign currencies.

Tax exemption in a few sectors

The FBCCI will propose supplying power, gas, and water to the industrial sector at discounted rates and exempting taxes on the same to facilitate production and export. It will also propose reducing flat and plot registration fees and taxes to 5%.

The trade body will also suggest bringing down the tax rate to 2% with a view to launching a secondary plot, flat market, abolishing the arrangement in lieu of refunding advance tax (AT) because it is complicated to get money back in this system.

Source tax is currently deducted in 54 sectors, and the rate is up to a maximum of 15%. The FBCCI may propose to reduce this rate to 2%-3%, sources said.

Reducing import duties

Currently, there is a maximum customs duty of up to 25% on imported goods. Apart from this, there are some other duties including supplementary duties.

The FBCCI feels that the 25% duty should be reduced to 10%-15% by 2030.

Raising tax-free income limit to Tk4 lakh

The FBCCI is in favour of increasing the tax-free income limit of an individual to Tk4 lakh from the existing Tk3 lakh. The organisation feels that due to the increase in the prices of goods, it has become difficult for low-income people to pay taxes.

It will also propose raising the tax-free income limit for women and senior citizens by Tk1 lakh from presently Tk3.5 lakh.

Apart from this, this apex trade body is also in favour of cancelling the existing 2% source tax on daily necessities including rice, wheat, potato, onion, garlic, chickpea, dal, turmeric, flour, flour, salt, edible oil, and sugar.

Proposals to increase tax net, ensure compliance

Along with the proposal to reduce the existing tax rates, the FBCCI will put forward some proposals to increase the tax net during Thursday's meeting.

Notable among these are the proposal to make it mandatory to submit up-to-date TIN numbers and proof of tax payment on various types of official work, both public and private, and to make tax registration of all entrepreneurs mandatory to be considered as proof of investment.