The Foreign Investors’ Chamber of Commerce and Industry on Monday, April 02, 2018 urged the government to lower corporate income tax rate by 5 per cent in the upcoming national budget for 2018-19 fiscal and freeze the rate for at least three years.
At a pre-budget discussion with the National Board of Revenue in its office in Dhaka, the platform of foreign investors in the country also proposed introduction of the progressive provisions of the suspended value-added tax act 2012, including simplification of VAT registration, withdrawal of price declaration and removal of supplementary duty on locally manufactured goods in the VAT Act 1991 through the next budget.
The FICCI claimed that the effective corporate income tax rate was much higher in Bangladesh and not competitive for potential foreign investors as the countries like Vietnam, Indonesia, Sri Lanka and Malaysia offer much lower tax rate. Currently, there are several corporate income tax rates for different sectors ranging from 25 per cent to 45 per cent.
The corporate tax rate for a non-publicly traded company is 35 per cent; for a publicly traded company it is 25 per cent; 40 per cent and 42.5 per cent respectively for listed and non-listed banks, insurances and financial institutions; 37.5 per cent for merchant banks; and 45 per cent for mobile phone operators and cigarette manufacturing companies.
The foreign investors’ chamber also recommended withdrawal of the provision for minimum tax ranging from 0.60 per cent to 1 per cent of gross receipts irrespective of profit or loss as it termed the provision ‘going against the basic principle of taxation’.
It also demanded introduction of prospective effect of the measures related to corporate and personal income tax rates of the finance act. Imposition of tax at source at the rate of 5 per cent on retirement funds like provident fund, gratuity and superannuation funds should also be withdrawn as the provision was conflicting with other sections of the income tax act and labour laws, it said. The chamber also urged the NBR to increase the limit of net assets to Tk 5 crore from existing Tk 2.5 crore for imposition of wealth surcharge.
Surcharge increases the effective tax rate of the individual taxpayers, it said.
It also demanded withdrawal of the provision for payment of certain amount of tax liability before going to appeal at tribunal and High Court against the demand made by tax offices. FICCI president Shehzad Munim sought some reforms in taxation policy for attracting foreign direct investment to make the country’s graduation from least developed country status smooth and achieve the sustainable development goals.
He requested the NBR to introduce a negotiation process with the member-level officials of the board for settlement of disputes involving a large amount of tax when a commissioner issues the initial demand notice as there is no option except for going to courts once the commissioner issues the final demand notice.
It will help to reduce the number of disputes, he said, adding that large taxpayers have a huge number of disputes with field offices, which is not good for business.
Dialogue may be one of the best instruments to improve business climate, he added. NBR chairman Md Mosharraf Hossain Bhuiyan said that they would scrutinise the proposals and try to accommodate some of them, including reduction the corporate tax rate in the next budget. Responding to a demand for tax rebate for banks’ bad debts, he said that the NBR would not provide such benefits as it would encourage building up of non-performing loans as banks give loan rescheduling facility to big defaulters. FICCI taxation sub-committee convener Abdul Khalek placed the proposals before the meeting where other members of the chamber spoke.