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Business leaders have expressed disappointment with the facilities cut in the proposed budget for FY25 and urged Finance Minister Abul Hassan Mahmood Ali to review the policies, particularly taxation, considering the ongoing economic challenges and high inflation, and have suggested making the export sector more competitive.
They have called on the government to reduce the source tax on exports from 1 per cent to 0.5 per cent, withdraw Advance Income Tax (AIT) on importing raw materials and exporting goods or make it a final settlement, and increase the personal income tax limit to Tk 4.5 lakh from the current Tk 3.5 lakh.
The leaders also demanded that the source tax not be imposed on the export of leather and leather goods, jute and jute goods, and agricultural products, as these sectors have been struggling for the past two fiscal years.
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) wrote to the finance ministry and National Board of Revenue (NBR) on June 15, urging a review of the taxation policies in the proposed budget for FY25.
Business leaders fear economic strain
The FBCCI and other business leaders believe that if the government does not consider their demands, industrialists will not be able to bear the burden, as the new taxes would add to the existing pressures, ultimately harming the economy of Bangladesh.
FBCCI President Mahbubul Alam told The Business Post, "We shared our observations on the budget at the post-budget press conference and formally wrote to the government in detail. We believe he will consider our demand."
FY25 budget proposal
Finance Minister Abul Hassan Mahmood Ali presented a Tk 7,97,000 crore budget proposal for FY25 to the nation in Parliament on June 6, intending to build a prosperous, developed, and smart Bangladesh. To meet the expenditure, he plans to borrow Tk 1,37,500 crore from local banks despite liquidity shortages.
In the budget proposal, Mahmood said he would gradually withdraw cash incentives on exports and impose a 1 per cent duty on investment in economic zones and hi-tech parks.
Despite businesses demanding a reduction of the source tax on exports from 1 per cent to 0.5 per cent and considering this as a final settlement, the minister has not changed the policy. He has proposed imposing a 15 per cent capital gains tax on capital market investors’ income exceeding Tk 50 lakh.
The finance minister proposed allowing the whitening of undisclosed wealth on a "no questions asked" basis by paying only a 15 per cent tax, while regular taxpayers pay up to 30 per cent.
Calls to reduce source tax, continue cash incentives
Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Executive President Mohammad Hatem said, "We requested the government to reduce the source tax and consider this as the final settlement, but the finance minister did not mention this in his budget speech. We continue to make the same demand."
He also warned, "The government's plan to borrow heavily from banks will affect private sector investments."
Team Pharmaceuticals Managing Director Abdullah Hil Rakib said that according to World Trade Organization (WTO) rules, the government can continue cash incentives for six years after graduation. Alternatively, the government can provide incentives through other means.
"We have asked the finance ministry to either maintain existing facilities until 2032, as per WTO rules, or offer alternatives. We reiterate this request considering the country's economy and employment."
Urging the continuation of duty-free investment facilities in economic zones for at least five years and increasing the minimum tax limit, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President SM Mannan Kochi said, "Otherwise, small entrepreneurs will struggle to thrive given the current high interest rates and business establishment costs."
Concerns over tax fairness, sectoral survival
Regarding the whitening of undisclosed wealth, Indet Group Managing Director Al Shahriar Ahmed said, 'While we are paying tax regularly, with some paying up to 30 per cent, amnesty on undisclosed money by paying 15 per cent is not fair.
“Regular taxpayers will be demotivated to pay tax," he added.
Bangladesh Jute Goods Exporters' Association Director Esrat Jahan Chowdhury said, "The jute and leather goods sectors are struggling to survive as they have failed to retain export growth for the last two fiscal years.
We expected the government to announce new facilities for these sectors to revive. But unfortunately, all policies remain unchanged, and we still have to pay a 1 per cent source tax. We urge the government to review taxation and incentives policies, as almost 90-95 per cent of our raw materials are sourced locally."
