Salman F Rahman calls for tax collection digitisation, policy reform

Salman F Rahman, advisor to the prime minister on private industry and investment, said tax collection needs to be digitised and that the tax-GDP ratio will not increase unless the National Board of Revenue (NBR) changes its current tax collection policy.

"The VAT, income tax and customs departments lack communication and data sharing. There is no connectivity between them. If major reforms are not brought about, our tax-GDP ratio will not improve," he said at a seminar on Investment Climate for Smart Bangladesh in Dhaka yesterday.

Salman criticised the NBR for focusing on increasing taxes for existing taxpayers while neglecting initiatives to expand the tax net.

"The tax-GDP ratio has come down from 8% to 7.8%. If NBR does not reform policies this ratio will fall further next year," he said.

According to the loan conditions of the International Monetary Fund (IMF), the NBR will have to increase the contribution of taxes to GDP (tax-GDP ratio) to 9.5% by June 2026.

Meanwhile, IT sector business leaders demanded an extension to the tax exemption for another three years at the seminar. Salman also expressed support for the demand.

The current tax exemption period in the IT sector is scheduled to end on 30 June.

"The ICT sector is not yet mature. Therefore, the benefits that have been given should not be taken away. I will talk to the finance minister and the prime minister about this. We need to give more incentives in this sector to face future challenges," Salman said.

eGeneration Limited Managing Director Shameem Ahsan compared Bangladesh's GDP growth in the IT sector (1.09%) to the Philippines (3.4%), Indonesia (4.23%), Estonia (7%) and India (7.4%).

"After three years of tax exemption, a tax of 1% to 2% per annum may be imposed. Government policy support is needed here," he said.

Zunaid Ahmed Palak, the state minister of posts, telecommunications, and information technology, was a special guest at the seminar organised by the Venture Capital and Private Equity Association of Bangladesh.

"We support the logical requests of businessmen in this sector and advocate for maintaining tax exemptions in the IT sector. The government aims to achieve a $5 billion export target in this sector by 2029, necessitating continued tax exemptions," he said.

He further added, "NBR should implement policies for the IT sector in three phases 2026, 2031, and 2041. With the RMG sector receiving support for 40 years and now being the primary export sector, similar policy backing for the ICT sector over the next decade could establish it as the leading source of export earnings."

Raisul Kabir, CEO of Brain Station 23 PLC, said, "Taxing our software exports would hinder our competitiveness against other countries."

Mohammad Zahirul Islam, MD of Smart Technologies (BD) Ltd, advocated for tax-free ICT product exports, stressing the need for more entrepreneurial support in the era of AI.

Guest of Honour Zara Jabeen Mahbub, MP and VCPEAB advisor, highlighted the crucial role of women in achieving a smarter Bangladesh, underscoring their inclusion, particularly in healthcare digitisation efforts.

"As the sole female speaker today, I note the low participation of women in the ICT sector. Providing incentives for entrepreneurs to increase female involvement is vital," she said.

Industry sources reveal an annual local market size of the ICT sector at approximately $1.5 billion, with exports totalling $1.9 billion and investments reaching around $600 million.

Kazi Nabil Ahmed, MP, said that tax benefits are crucial for growing industries like technology. 

"To ensure a smart Bangladesh, we must establish a knowledge-based ecosystem that penetrates every segment. It's imperative to leapfrog certain stages to bridge the gap with other countries; otherwise, we risk falling behind continuously," he added. 

He also said the vision 2021 has been materialised and the 'Smart Bangladesh' vision of 2041 will also be possible through smart government and smart citizens as smart Bangladesh is important in all sectors like healthcare, education, sports and others.

"Entrepreneurs need to be more proactive in order to build an entrepreneurial workforce. For this, necessary policies should be adopted so that Smart Bangladesh is visible," he added.