Cut corporate tax in phases: FICCI
Foreign companies based in Bangladesh yesterday demanded gradual decrease of corporate tax towards 25 percent to ensure more revenue generation and make Bangladesh an attractive destination for overseas investors.
“What can we do with the 35 percent corporate tax? People will dodge more [in a high tax environment],” said Rupali Chowdhury, president of the Foreign Investors' Chamber of Commerce & Industry, in a meeting with Finance Minister AMA Muhith in the secretariat.
“You can set a policy to have 25 percent corporate tax in the next five years. You can't do it overnight, but you can go phase by phase.”
She also referred to India, which has brought in major changes in case of foreign direct investment, opening up key sectors, including aviation, defence, food retail and single-brand retail.
Chowdhury, who has been serving as the managing director of Berger Paints Bangladesh since 2008, also differed with the finance minister about the growth in FDI in 2015.
Although the FDI grew an impressive 44 percent in terms of percentage, the amount received -- $2.2 billion -- is “peanuts” for Bangladesh.
“Cambodia and Myanmar are ahead of Bangladesh -- it should not be. It should be recognised that we are not doing well in that platform.”
She said foreign companies exactly know why FDI is not coming to Bangladesh, pointing out constraints related to land and energy.
“Gas is not available at all. Electricity is there but connection is not. We have generation but we do not have transmission lines.”
“Labour is cheaper, but other factors are not there. I think we should work towards FDI because without FDI any country can't grow. Bangladesh should get very good FDI,” she added.
Muhith said industries would get smooth supply of gas from January 2019 as the work to set up the terminal for liquefied natural gas is progressing fast.
The import of LNG would be much easier after the setting up of a terminal on the island of Moheshkhali in the Bay of Bengal. “From January 2019 you are assured of gas.”
Muhith said one could find so many flaws and loopholes in the budget. “But I thought this was my best budget so far, which means a great deal of work went into it before it was finalised.”
The minister said two days are left to make the final decisions on any changes to the proposed budget.
The government has proposed reduction in the investment allowances from 30 percent of total income to 20 percent and reduction in the rate of rebate on investment from 15 percent to a range of 15 percent to 10 percent based on income level.
“Resulting from this change, the tax liability of all the salaried employees will increase substantially,” said Masud Khan, chief financial officer of Lafarge Surma Cement Ltd.
He said they have made an analysis taking total income of different levels and observed that an employee having an income of Tk 40,000 per month would have 521 percent increase in tax while those with an income of 1 lakh would see an increase of a mere 26 percent.
Due to being compliant companies, the FICCI members would require to deduct this additional tax liability of employees from their salary of June 2016.
“This change, which is coming right before holy Eid-ul-Fitr, will have adverse impact on the employees and their families.”
“Squeezing of investment allowance will also be detrimental to investment and will have adverse impact on the share market as well. Therefore, we would humbly request you to review the decisions on limiting investment opportunities for the individual salaried person.”