Foreign investors in Bangladesh yesterday demanded cuts in corporate tax at least 5 percentage points to attract foreign funds and create expansion opportunities for businesses.
“We proposed reducing the corporate tax in phases so that the government's revenue generation does not face any big fall,” said Abdul Khalek, convener of tariff, trade, taxation and corporate law committee of the Foreign Investors' Chamber of Commerce and Industry.
If the first phase of the corporate rate tax cuts works well, the government can go for the next phase after two years, he said.
After that, the corporate tax rate for both the domestic and foreign companies will come to a tolerable level.
“By this time, the foreign investors will feel encouraged to invest in Bangladesh and the existing companies will expand their operations,” he said at the FICCI's regular luncheon meeting at The Westin hotel in Dhaka.
The current corporate tax on revenues of a non-listed company is 35 percent. “This is too high given the existing business situation in the country.”
The 25 percent tax on publicly traded companies, the 42.5 percent tax on non-listed banks, insurance companies and non-bank financial institutions, and the 40 percent tax on listed banks, insurance companies and NBFIs are too high to make profit.
The 37.5 percent tax on merchant banks, the 47.5 percent tax on cigarette manufacturers and the 45 percent tax on mobile operators are also excessive, he said in his keynote presentation.
The tax expert also compared the local corporate tax structure with some other peer countries like Vietnam (20 percent), Indonesia (25 percent), Sri Lanka (28 percent), Thailand (20 percent) and Malaysia (24 percent).
Khalek called upon Mosharraf Hossain Bhuiyan, chairman of the National Board of Revenue, who was the chief guest at the luncheon, to eliminate the 0.6 percent minimum tax as the government cannot generate a big amount of revenue from it.
“The nature of the minimum tax is that any company needs to pay it, whether it can make any profit or not. Many small and medium companies cannot make any profit, but they still have to pay this kind of tax.”
Elimination of such tax will also encourage foreign and local investors to pour in more money into the economy, Khalek added.
“We will be conducive to businesses as well as revenue collection,” Bhuiyan said, adding that domestic resource mobilisation is crucial amid the declining foreign aid.
He also urged the multinational companies with operations in Bangladesh to maintain one books of accounts instead of two for ensuring transparency.
The foreign companies in Bangladesh contribute to 30 percent of the total national budget in a year, Shehzad Munim, president of FICCI.
“Businesses need pragmatic, predictable and enforceable fiscal policies,” said Munim, also the managing director of the British American Tobacco Bangladesh.
Subsequently, he also called for simplification of the rules for company registration, withdrawal of price declaration and supplementary duty on locally manufactured goods, and easing of the rules of contract farming.
Francois de Maricourt, CEO of HSBC Bangladesh, also spoke.