FICCI worried over incentive deduction

The Foreign Investors' Chamber of Commerce and Industry (FICCI) has expressed concern that deducting incentives from private economic zones (EZs) and hi-tech parks and keeping incentives for government EZs may erode investors’ confidence.

The apex chamber of multinational companies on Monday called for reforms, such as merging the three wings of NBR (Income Tax, VAT, and Customs), separating the Collection Department from the Policy Department, and implementing the National Single Window (NSW) project, which will help enforce the law properly.

FICCI President Zaved Akhtar made these observations at a post-budget press briefing at Pan Pacific Sonargaon in Dhaka on Monday.

He said, “The proposed FY25 budget aims to support the economy amidst challenges, with ambitious yet achievable targets for budget size, GDP growth and inflation. Key reforms in income tax and customs are designed to enhance revenue, reduce deficits, and strengthen investor confidence.

“We appreciated the tax reforms in the proposed 2024-25 budget for simplifying the tax system but expressed concern over the high effective tax rates (ETR).”

He welcomed the 15 per cent income tax rate for private funds but criticised the exemption of public funds from taxation, creating disparities between government and private sector employees.

The achievability of NBR’s Tk 4,80,000 crore revenue target is questionable. The budget lacks provisions for automating tax, VAT, and customs administration, he said.

FICCI stressed the need for VAT credit simplification and changes in TDS compliance, such as including entities above Tk 10 crore under withholding authority. They supported digital tax integration initiatives for increased transparency and efficiency.

The trade body also opposed the proposed increase in personal income tax rates, arguing it would unfairly burden regular taxpayers and discourage compliance. They recommended maintaining last year's rates for FY2024-25 to promote a predictive tax culture.

FICCI also emphasised reducing tax rates while widening the tax net to create a fairer, more efficient system that encourages compliance, boosts economic growth and ensures stable tax revenue. They also raised concerns about extra duties and taxes on telecom, carbonated beverages, and water purifiers, which could harm business profitability and deter FDI.

The chamber emphasised the need for financial sector reform and improving Bangladesh's low revenue-to-GDP ratio. The Household Income Survey showed that 10 per cent of the population contributes almost 40 per cent of national income, but there are only 10 million registered taxpayers.

Zaved said, “We recommended innovative approaches like sector-wise revenue analysis to increase the taxpayer base.

“We appreciated the acceptance of our proposed amendments in the Finance Bill 2024, particularly the prospective tax rate, which aids business planning and investment.”

They also welcomed the simplified tax deduction at source for industrial raw materials and the extension of time for monthly withholding tax return submission.

Projections indicate GDP growth could rise by more than 93 basis points, with inflation decreasing by over 150 basis points. However, the detailed implications of deficit financing, such as potential higher interest rates, need careful consideration to ensure fiscal stability.