Tax exemption for IT sector likely to be extended

The tax exemption facility for the software and Information technology-enabled services sector, which is scheduled to end in June 2024, is likely to be extended for several more years, a senior tax policy official hinted in a pre-budget talk on Tuesday. 

The development came as the Association of Software and Information Services (BASIS) proposed to extend the tax facility until 2030 so that the country can achieve the target of $5 billion IT-service export and make the sector further vibrant.   

"You demand to extend the facility until 2030, it may not be possible. However, the extension will be in place. You will get something positive," Md Kausar Ali, first secretary of tax policy at the National Board of Revenue (NBR), said at the discussion at its office in the capital.  

At the event, BASIS Senior Vice-President Samira Zuberi Himika placed their budget proposals and said the tax facility needs to be extended till 2030 for achieving $5 billion in exports, preventing local currency outflows and keeping the domestic ICT sector competitive.

"The Covid-19 pandemic and its fallouts set us back a few years. Efforts to expand export markets are ongoing but significant progress is yet to come. Investors are reluctant to invest long-term as the tax exemption period is remaining for a year," she said.

"There is no alternative to extend the tax facility if we want young entrepreneurs and new investment in ICT businesses, which is considered a priority sector," she added, calling for the digitalisation of the tax exemption system. 

Representatives from the Mobile Phone Industry Owners Association of Bangladesh, the Bangladesh Refrigerator Manufacturers Association, and the Bangladesh Computer Samity also took part in the pre-budget meeting.

Mobile phone and refrigerator manufacturers also demanded an extension of the reduced VAT rates facility for raw material imports, which is supposed to end next fiscal year, for another five years, while the Computer Samity call for the withdrawal of 15% VAT on ICT products, reduced taxes on printer imports, and so on.

The revenue board also urged to include hosting and cloud services in the definition of IT-enabled services and ensure income tax rebates for IT professionals.

"Bangladesh is set to graduate from the least developed country category by 2026. After that, we will not be able to provide large-scale protections and tax exemptions (to the local industry)," NBR Member Masud Sadiq, who presided over the meeting, said and urged industries to increase their capacity to face challenges in the coming days.