Tax breaks for developers, investors of hi-tech parks | The Daily Star
12:00 AM, July 14, 2015 / LAST MODIFIED: 12:00 AM, July 14, 2015

Tax breaks for developers, investors of hi-tech parks

The National Board of Revenue has offered a tax waiver for investors in hi-tech parks in an effort to promote investment and youth employment.

Under the scheme, investors in the parks will get full tax breaks for the first three years of their operations, after which the benefit will gradually decline to be fully phased out in the 11th year.

The developers of the parks will also get full tax breaks for 10 years from the beginning of the operation of the hi-tech parks, an NBR official said.

The tax authority announced the incentives a month after Finance Minister AMA Muhith in his budget speech shared the government's plan to provide special packages to encourage investment in developing economic zones and hi-tech parks along with investment in these areas.

“I sincerely believe that the hi-tech park will play a pivotal role in further opening the door of opportunities for the IT Sector in Bangladesh,” said Muhith while presenting his budget proposal for fiscal 2015-16 last month.

Bangladesh Hi-Tech Park Authority or BHPA has approved six parks, with work on Kaliakoir and Jessore projects already underway.

There are plans to facilitate establishment of 12 more parks in several districts to promote development of IT and information technology-enabled service (ITES) industries, both of which are still at their nascent stages.

Stakeholders said Bangladesh's IT services industry, which employs more than 20,000 people, holds great potential owing to the vast pool of young, trained and English-speaking resources.

The workforce is available at costs almost 40 percent lower than in established destinations like India and the Philippines, according to a study by KPMG in 2012.

With wages and operating costs rising in the traditional outsourcing destinations, Bangladesh's prospects are rising, it said.

The country offers attractive business opportunities for multinationals interested in outsourcing or off-shoring, the KPMG study added.

The parks are expected to create nearly 10 lakh jobs and increase the present export earnings of $122 million manifold, according to government estimates.

The government predicts that exports receipts from IT services may touch the $1 billion-mark by 2018.

In a notice, the NBR said the benefits will be given to those that will be declared as parks under the Bangladesh Hi-Tech Park Authority Act 2010. 

Under the scheme, investors in the hi-tech park will get 80 percent tax waiver on their incomes from services or production in the fourth year of operation. 

The exemption will gradually decline by 10 percentage points each year until the 10th year when a 20 percent tax break will be applicable. The developers will get 70 percent tax waiver on the 11th year and 30 percent on the 12th year. The benefit will be over in the 13th year, said an NBR official.

Abu Reza Khan, managing director of Summit Technopolis, one of the developers of Kaliakoir Hi-Tech Park, welcomed the NBR's move to provide a full tax break for ten years.

The diminishing tax waiver for investors may discourage foreign investment in the parks, he said.

“It will be tough for us to attract takers for the parks if similar tax incentive is not offered to investors as well.”

He cited the case in export processing zones, where a ten-year full tax exemption yielded great benefits.

“We have already contacted global companies like General Motors and Siemens after signing the deal with the government to develop the park. These companies may not come unless they get similar incentives.”

BHPA also sought full tax exemption for ten years for both the developers and investors from the tax authority, said Managing Director Hosne Ara Begum.

She said the BHPA would urge the government to reduce electricity bills for hi-tech parks and offer incentives for laying the fibre optic cable.

To facilitate exports, the BHPA also wants the revenue authority to allow duty-free import of raw materials for investors in the parks, she added. In a separate notice, the tax authority has also offered similar incentives for investors and developers of economic zones, set to be built in several locations around the country.

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