IT entrepreneurs seek tax waiver for few more years

The tax waiver for the software and ITES (IT-enabled services) sector, set to end this fiscal year, should be continued for the next few years for the sake of local firms' competitiveness and their contribution to building a Smart Bangladesh by 2041, technology entrepreneurs urged at a roundtable in the capital on Wednesday (24 April).

At the roundtable titled "Tax Policy Suggestions for Promoting Local Tech Startups," jointly organised by the Venture Capital and Private Equity Association of Bangladesh (VCPEAB), the Bangladesh Association of Software and Information Services (BASIS), the Institute of Informatics and Development (IID), and the EdTech Society, speakers said the revenue the government might get from taxing the potential sector would be much less than its other contributions to the national exchequer.

Tech entrepreneur and former BASIS president AKM Fahim Mashroor said the government assessment stating the tax exemption cost the government Tk1,470 crore a year is not realistic at all.

In fact, some 5,000 IT and startup firms, paying around Tk9,000 crore in salaries to their tens of thousands of employees a year, are now making Tk1,000 crore in total profits that should increase government revenue by Tk200-300 crore a year.

The corporate tax waiver, on the other hand, helps the government with much more income tax from industry employees, as most of them have already been taxpayers.

Supportive taxation helped flourish the sector over the years, and if the waiver is withdrawn now, the government might end up losing more revenue than it would add in the next 5-10 years, said VCPEAB Chairman Shameem Ahsan.

In his keynote, tax policy expert Snehasish Barua, a partner of Snehasish Mahmud and Co, said most of the firms are small and would lose competitiveness if tax benefits were withdrawn, as it would add to their costs both for tax payment and tax compliance.

As a result, foreign firms would take over the flourishing businesses, and local talents would be discouraged, he added.

Twenty startup founders called for making tax policies and a tax collection process suitable for supporting the growth of the sector. They said startups have made nearly a billion dollars in investments in the last decade, and the potential is much bigger.

Tech investors need a predictable tax policy for the next 5-10 years, they added.

BASIS Senior Vice President Samira Zuberi Himika, VCPEAB Director Shawkat Hossain, and IID founder and CEO Syeed Ahamed were among the speakers.