FICCI president says next budget an opportunity to boost investor confidence

The National Board of Revenue plays a crucial role in fostering business and investor confidence, and the upcoming 2025–26 budget presents a key moment to advance that goal through tax policy reforms, said Mohammad Zaved Akhtar, president of the Foreign Investors' Chamber of Commerce and Industry (FICCI) and managing director of Unilever Bangladesh, the country's leading FMCG company.

In an interview with The Business Standard at the FICCI office in the capital's Gulshan area yesterday, Zaved shared his views on the country's reform priorities, foreign investors' challenges, and potential solutions. 

While he commended the interim government's efforts over the past 10 months, he also pointed out that incidents such as mob violence have shaken investor confidence. 

The FICCI represents a significant portion of foreign investors in Bangladesh, with around 200 companies under its umbrella. According to the chamber, its member companies contribute one-third of the government's total revenue.

Zaved noted that, on paper, Bangladesh has reduced the corporate tax rate by around 10 percentage points in recent years. Currently, the minimum rate stands at 20% for listed companies (subject to meeting certain conditions) and 25% for non-listed companies. 

However, in practice, investors often face an effective tax rate of 40% or higher due to disallowances and strict conditions applied to various expenses, placing considerable pressure on companies that strive to remain compliant.

He further stressed the need for several reforms from the NBR, including implementing a unified VAT rate, reducing the arbitrary powers of customs officials in valuing imported consignments, and rationalising conditions around cash transactions. 

Reforms are also needed in areas such as establishing a single investment agency to replace the multiple existing bodies and improving the efficiency of ports and customs.

"It may not be possible to remove all barriers to investment in one year, but a roadmap can be introduced this year, which would help build confidence among investors gradually," he said.

Highlighting the high effective tax rate as a major barrier for investors, Zaved said, "No other country in the world has a system where the official tax rate differs so significantly from what companies actually pay. In Vietnam, for example, the rate on paper matches the real burden."

He pointed out that revenue collection from compliant companies is disproportionately high among homogeneous products in the market. This suggests that the government is unable to collect appropriate revenue from less compliant companies, putting additional pressure on those that do comply. "This is illogical," he added.

Emphasising that indirect taxes affect consumers across all income groups, he said the government should focus on increasing direct tax collection.

"Bangladesh is a good place for investment. There is a huge domestic market of 170 million people. The economy is now worth half a trillion USD, and is expected to double in the next 10 to 15 years. The commitments made to investors at the outset must be upheld, including ensuring the stable and quality supply of gas and electricity," the FICCI president said.

He acknowledged that, since 5 August last year, the interim government has taken several positive steps to attract foreign direct investment (FDI). 

He particularly praised the Bangladesh Bank, Bangladesh Investment Development Authority (Bida), and the NBR for their promising work during this period. 

He also noted significant investment opportunities in sectors such as leather, agriculture, and fisheries, and potential for global brands in electronics to invest in Bangladesh.

However, Zaved expressed concern over incidents during the recent April Investment Summit, when protests against the Israeli attack on Gaza led to attacks on local branches of foreign investment companies, including Coca-Cola, Pepsi, Bata, Nestlé, Reckitt Benckiser, Unilever, and Domino's Pizza. 

"While law enforcement agencies have since taken some measures, such incidents erode investor confidence. Despite the government's efforts to attract investment, such events do not send a positive message," he said.

"Investors want a stable government, through which long-term and predictable policies can be ensured. It doesn't matter much who is in power — what matters is that the government builds trust among investors," Zaved added.