Excess advance income tax increases cost of business: FBCCI to FinMin

The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) has expressed concern that the existing excess advance income tax collected from businesses at the import and supply stages increases the cost of doing business, weakening their competitiveness in the international market.

In a letter dated 7 March to Finance Minister Abul Hassan Mahmood Ali, FBCCI President Md Mahbubul Alam stated, "In most cases, the rate of tax deduction at source is much higher than the business profit."

The letter further reads, "This advance tax system is increasing the cost of doing business, which puts our businesses in a disadvantageous position in the international market."

Currently, in the case of import and supply or local sales, the tax deduction at source ranges between 0.5% and 12%. Additionally, the National Board of Revenue (NBR) also deducts advance tax at the import stage, up to 5%, and in some cases, deducts VAT from sources, referred to as VAT deduction at source, which is supposed to be refunded or adjusted.

Businesses claim that in most cases advance income tax, and advance VAT or advance tax cannot be refunded. If someone wants to adjust it, the process is cumbersome and time-consuming. In some cases, businesses cannot adjust the amount due to the complex process, leading to an increase in their costs.

The letter demanded the withdrawal of advance income tax and advance tax on the importation of raw materials and intermediate raw materials.

"The NBR should collect taxes from businesses based on their actual income. However, if businesses are required to pay taxes in advance, and considering that the adjustment process is complex, time-consuming, and not feasible in some cases, this would ultimately increase the cost of doing business," Munir Hossain, vice president of the country's apex trade body, told The Business Standard.

He said, "These factors increase the cost of goods, which is then passed on to consumers."

In the letter, FBCCI has called for conducting a study on tax deduction rates.

In addition to other demands surrounding income tax, the trade body also raised several demands regarding VAT and customs.

It has presented various proposals in consultative meetings with the NBR in the past, but most of them have not been accepted by the revenue board.

In its letter to the finance minister, the FBCCI president stated, "The business community never understands why their rational proposals were not considered.

"To make the next consultative meeting effective, preparing the minutes of each meeting is necessary."

This meeting is scheduled to be held on 4 April. FBCCI sources said these issues will also be discussed in that meeting.

The FBCCI letter presented at least 11 challenges facing the economy at present, including inflation control, market monitoring, the reserve crisis, a slowdown in remittances, export growth and new market addition, human resource development and productivity growth, ensuring the adequacy of foreign exchange, the interest rate and banking sector crisis, trade and investment facilitation, increasing the tax-to-GDP ratio, and coordination between revenue policy reform and monetary and fiscal policy for economic stability.

In this situation, the trade body has demanded special attention to at least seven issues in the next financial year. These include stabilising commodity prices and supplies, and protecting local and small-scale industries.

The letter also called for enforcement to limit the use of luxury goods, state security-listed goods, and non-essential items, suggesting not to apply supplementary duty on other products.

Additionally, there's a demand for the cancellation of awards given to NBR officials for uncovering revenue evasion.

'Strong political will needed to prevent money laundering'

In the letter, FBCCI emphasises the necessity for robust political commitment to curb the much-discussed issue of money laundering. Incidentally, it has been noted in various discussions that a significant amount of money is being syphoned out of the country every year.

The Bangladesh Economic Association, in its budget presentation last year, stated that nearly Tk12 lakh crore has been laundered out of the country in the 50 years since independence.

To address the foreign exchange crisis, the FBCCI has called for an expert-level review to assess the possibility of making changes in payback management when acquiring foreign loans, suppliers' credit, and rental schemes. Additionally, it has been suggested to exercise caution when accepting projects with foreign funding.