Bangladesh needs to bring in further progress to the business regulatory environment in order to retain and attract foreign investors, said the top leader of the trade body of global firms operating in the country.
"The proposed corporate tax cut is not enough. Other facilities like the ease of doing business are also needed," said Rupali Chowdhury, president of the Foreign Investors' Chamber of Commerce and Industry (FICCI).
The platform has welcomed the 2.5 percentage points cut in the corporate tax rate for the next fiscal year.
While unveiling the budget last week, Finance Minister AHM Mustafa Kamal proposed to cut the tax on non-listed companies to 30 per cent from 32.5 per cent and the rate for listed companies to 22.5 per cent from 25 per cent for the next fiscal year, starting July 1.
He put forward a proposal to bring down the corporate tax for one-person companies to 22.5 per cent from 25 per cent.
"The trend of reducing the corporate tax indicates that the government may cut it further in the near future," said Chowdhury.
"It is a welcoming move. It will attract both local and foreign investors in various emerging sectors of the economy, at the economic zones and other parts of the country."
According to the managing director of Berger Paints Bangladesh, the country needs more local and foreign investment.
"The proposed budget has provided some good options for the investors. However, some further steps are needed to encourage investors further."
For instance, the tax on the promotional expenses is fixed at 0.5 per cent, and the finance minister has proposed to reduce the advance value-added tax to 3 per cent from 4 per cent.
"We demanded the withdrawal of the taxes," she said.
Chowdhury pointed out that the proposed taxes on the internet and telecom services sectors would put the investors at bay.
"These taxes should be reviewed."
If the government does not cut the taxes and give more facilities, the effective tax rates would be eventually higher than the proposed 2.5 percentage point cut in the corporate tax, Chowdhury added.
"If the effective tax rate is higher, investors might not be interested in coming to Bangladesh."
The imposition of tax at source for e-commerce services and the hike in the corporate tax rate for mobile financial services will discourage the entrepreneurs in the sectors.
As a result, the expansion of e-commerce businesses will face barriers at a time when they are growing fast, she said.
"The government can review the proposals for the sectors as they are the new investment areas."
The proposed tax rebates and tax holiday to set up industries inside the economic zones will draw investment.
"The government should extend the tax facilities to both local and foreign companies inside the economic zones with a view to creating a more investment-friendly environment," Chowdhury said.