Bangladesh has long been trying to woo Foreign Direct Investment (FDI) with less than encouraging results. Among many factors, what really undermines our efforts in this regard is the lack of digitalization of the processes in the public sector. The room it creates for corruption deals a major blow to the existing foreign investors' confidence, which naturally discourages the prospective investors.
Attempts were made to solve this mess through digitalization, but the effort went in vain as they were mired in corrupt practices. Widespread nepotism in many instances increased the cost for such projects to astronomical level.
Just imagine, a company needs to take license from each district to operate in it! The FMCG, and the Telcos are required to pay tax to the local authorities for putting up billboards in their areas. VAT on rent, household tax are passed to the companies, though logic demands that such charges are to be levied on the landlords. What we need is a comprehensive plan for digitalizing the entire process of public service delivery with integration of digital payment system.
Another stumbling block is the unrestrained power of the NBR to arbitrarily decide on tax and VAT issues. For example, after having drafted the VAT Act in 2012, right after it was passed in the parliament, the NBR started to issue SROs that effectively made the VAT Act 2012 ineffective.
Also, there are often several VAT rates in place causing confusion. If VAT is truncated, then VAT rebate is not allowed, which adds to the business cost. NBR officers often exercise their power is deciding on critical matters such as cost disallowance, VAT rebate cancellation. These certainly doesn't help Bangladesh in the ease of doing business index.
Unfortunately, in the previous regime, we have seen instances where the judiciary was used to legitimize the unfounded demands from the NBR over tax disputes from the Telcos. Such deviation of justice in Bangladesh only prompts a very negative perception by the prospective investors.
What we need is to digitalize all the permits, NOCS etc along with digital payment gateway. We need to remove the need to pursue in-person engagement with the public sector wherever there is a digital alternative available. The Ministry of Commerce can take a lead role in coordinating this initiative. The moment for fundamental change is now!
