Tax revision needed for beverage industry growth: FBCCI

Amendments in the tax policy can fuel the growth of the beverage industry, attracting both domestic and foreign investment while bolstering government revenue, said Mahbubul Alam, president of the Federation of Bangladesh Chambers of Commerce and Industries, today (15 May).

"I believe the government will take proactive steps to address the industry's challenges, ensuring its continued development," he said during a roundtable discussion titled "Mitigating Policy Induced Constraints of the Beverage Industry of Bangladesh" in the capital.

Researchers and industry stakeholders gathered to address the impact of taxation and related policies on the beverage sector's growth and to explore potential solutions.

Speakers at the meeting jointly organised by the FBCCI and the Business Initiative Leading Development highlighted the urgent need for tax reductions and policy adjustments to support the struggling industry amidst economic challenges.

FBCCI's Senior Vice-President Md Amin Helaly, in his speech as the chief guest of the round table, said, "Taxes should be reduced as a short-term solution to save upstream industries like beverages. But we should also think about environmental and health issues in the long run."

Mohsina Yasmin, an executive member of the Bangladesh Investment Development Authority, said, "Suddenly increasing the tax on beverages will cause investors to stop investing in the sector. As a result the industry will collapse in the near future". 

Rezaul Karim, general manager of Akij Food & Beverage Ltd, said, "The supplementary tax on water should be removed; it is not a luxury product. We are now forced to consume mineral water, so it is not desirable to tax a life-saving product."

Regarding the health damage allegations of soft drinks, he further said, "People in our country like sweets. If the price of soft drinks increases, people will turn to other sweet products like desserts."

Coke Bangladesh Public Relations, Communications and Sustainability Director Anowarul Amin said, "If the tax on beverages is reduced in the country, companies will bring ready-to-drink products to the market, which will be much healthier than street-side condensed milk tea and they will consume sweets."

He also noted that the current tax on carbonated drinks is more than 48%, including various taxes. In comparison, beverages are taxed at 40% in India, 29% in Sri Lanka, 39% in Nepal, and 30% in Bhutan.

Ferdaus Ara Begum, CEO of Business Initiative Leading Development, said that the country's beverage industry experienced a significant downturn in sales and revenue from July to December 2023.

"So it estimated a shortfall of over Tk100 crore annually. This decline is attributed to several factors like the effects of the new Income Tax Act 2023, global economic challenges, high inflation, increased Supplementary Duty (SD) in the region, and rising raw material costs due to foreign currency fluctuations," she said.

To mitigate these challenges, the beverage company suggested reducing the minimum tax rate from 3% to 1% to help the sector recover and gradually reach a 27.5% corporate tax rate.