Govt cannot but legalise black money
15pc tax on stock dividend and retained earnings and reserve to help general investors
Results from the new VAT act will come after 2-3yrs
No scope for businesses to abuse the act
Businesses should inform govt if they face problems with 5pc advance tax on import
The finance minister has proposed a number of tax measures in his budget that will help local industries grow, according to a PricewaterhouseCoopers (PwC) analysis.
The analysis said local industries, such as small and medium enterprises, footwear and pharmaceuticals that make cancer medicines, industrial gases, lifts, refrigerators, air conditioners and some other services sectors got different tax benefits in the proposed budget. PwC, however, found that the proposed duty hike on some other items would negatively affect consumers.
The US-based auditing and accounting firm yesterday came up with the analysis on the national budget placed in parliament on Thursday. SMEs with a turnover of up to Tk 50 lakh will enjoy full exemption from payment of 4 percent of VAT, up from the existing ceiling of Tk 30 lakh, it said.
Customs duty on the import of raw materials of lifts, refrigerators, compressors, air conditioners, and electric motors will be reduced to 1-5 percent, which will give a boost to the domestic manufacturing, said the firm at a press conference at its Dhaka office.
Regulatory and supplementary duties on import of inputs for the footwear industry are also exempted, which is a good step for promoting the sector, said Pulak Saha, a partner at PwC for tax and regulatory services.
He, however, said some budgetary measures that proposed hiking tax would have a negative impact on consumers.
Import of smartphones will be costlier because of an increase in customs duty from 10 percent to 25 percent. An increase in customs duty on milk powder and export duty on rice bran will create a pressure on consumers.
Asked whether PwC agreed with the government’s move to legalise black money, Saha said there was no alternative but to extend the opportunity to the holders of undisclosed money.
The government will be forced to meet its financing need from either domestic or foreign sources if it does not offer the opportunity, he said.
“Whitening of the black money is a common phenomenon for any developing country and Bangladesh is no exception. India did the same in 1997,” Saha said.
On the new VAT Act, Saha said people usually face pressure during the initial phase of implementation. The output from the law will be visible after 2-3 years, he said.
There is no scope for the country’s businesspeople to run commercial activities bypassing the rules and regulations of the law, he said. The new Act is modern and the businesspeople should clearly understand it first, he said.
Businesses should discuss with the government if they face any problem while complying with the 5 percent advanced tax on import, Saha said.
A new finance bill will be passed to make the new VAT Act effective, said Mamun Rashid, managing partner of PwC.
PwC will work with both the National Board of Revenue and consumers to implement the new law, he said.
The government’s plan to introduce 15 percent tax on stock dividend and retained earnings and reserves of listed companies will encourage investors to make further investment, said Sushmita Basu, another partner at PwC.
The move will also inspire the listed companies to offer cash dividends instead of stock, she said.