An elite chamber urges the government to restructure Bangladesh's corporate income tax as businesses are denied benefits of rate cuts through excessive "disallowance of expense" and "tax deducted at source".
In a pre-budget meet Wednesday with the revenue board, the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) said the payable tax on corporate income ultimately stands tall and pleaded for redesigning the taxation suiting regional standards to enable the businesses to play neck and neck with competitors, especially in open- market trade after Bangladesh's LDC graduation.
The chamber leaders argue that setting the corporate tax rates and overall tax structures matching with regional competitor countries is imperative for a sustainable graduation from the trade preference-endowed LDC status.
"The effective corporate tax rates in the country are still higher than in neighbouring India and Vietnam despite reduction in the tax by 5 per cent during last two years," the MCCI said during the new budget-preparatory discussion on the National Board of Revenue (NBR) premises in Dhaka.
The discussion was organised by the government's revenue authority in lockstep with other stakeholders and policymakers ahead of framing the budget for the financial year 2022-23. NBR Chairman Abu Hena Md Rahmatul Muneem presided.
Addressing the event MCCI President Saiful Islam said the government should bring down effective corporate tax as the higher effective tax rates are affecting both domestic and foreign investment in the country.
"Disallowed expenditure and TDS are so high in the country that traders are not receiving the benefits of the 5.0-per cent tax cut," he told the meet, adding that in the case of public limited companies, the corporate tax rate is 22.5 per cent, but in some cases it ranges from 40 to 50 per cent.
He said Bangladesh should be ready, especially with tax regimes, to counter the loss of preferences after LDC graduation.
Echoing the incumbent president's views, former MCCI president Syed Nasim Manzur noted that if Bangladesh wants to sustain the growth in export, it has to compete with Vietnam and other neighbouring countries.
"We can only do that if Bangladesh can reduce cost of doing business and increase efficiency," he said.
He terms unpredictability in different tax rates detrimental to export growth.
Noting that tax rates for exports have been fluctuating over the years, the leading businessman opines that such sings should be stopped.
He urged the NBR to stop discrepancies in export tax rates for different sectors.
"There should be a predictability and one tax rate for all export sectors, and we can assure you of US$ 100b worth of exports," he told the NBR chairman.
He requested the NBR to apply incentives on TDS as well.
Syed Nasim Manzur urged the revenue board to incentivize production-based manufacturing sector, as in India.
Another former MCCI president, Nihad Kabir, said the NBR should be working from now on how the country's tax policy should play its role after graduation in 2026.
"NBR should form a research cell to work on this issue from this year," she says.
She feels the existing lowly tax-GDP ratio doesn't fit in present Bangladesh-now on a higher trajectory of development through status change.
Ms Kabir said the NBR should tax untaxed businesses instead of pressing on the businesses that have already been paying taxes.
She urged the tax authority to introduce a mechanism where harassed businesses can complain anonymously.
While placing the proposals and suggestions, the MCCI president noted that the existing law empowers the "Office of the Comptroller and Auditor General of Bangladesh" to investigate companies' accounts, tax receipts or tax refunds.
He urged the NBR to reconsider the provision of re-audit by the CAG despite the disposal of income-tax returns in the income-tax department.
"This is increasing the business expenses of the traders, including wastage of money and time," he said.
The MCCI requested the NBR to introduce provision of online hearing at the stage of tax assessment, appeal, tribunal, alternative dispute resolution (ADR).
"It is need of the time-if the matter is included in the law, time will be saved on the one hand, and attendance at the hearing will be ensured on the other," the chamber president said.
The NBR chairman observed that there were still valid reasons to reduce the current corporate tax rate.
The MCCI recommended that any change in the Finance Act should be made effective from July 1 of the following year.
"Then it will be possible to avoid many hassles regarding the annual general meeting and the approved financial statements of the shareholders," the MCCI proposal says.
In his speech, the NBR chairman assured the trade-body leaders that every proposal of the chamber would be reviewed and considered carefully.
He admitted that there is still rationale for reducing corporate-tax rates.
However, he said that such a decision could not be taken considering the risks surrounding revenue collection.
Apart from MCCI leaders, senior NBR officials were also present at the programme.
