Doing business became more and more difficult in 10 years

Mohammad Hatem, a successful businessman in Bangladesh, has been exporting readymade garments for 35 years. He is one of the founders of the Bangladesh Knitwear Manufacturers and Exporters Association and also its incumbent executive president. He talks about Bangladesh’s deteriorating business environment and his expectations from the upcoming national budget with The Business Post’s Arifur Rahaman Tuhin

The government is going to propose the national budget for the 2022-23 fiscal year after two years of the Covid-19 pandemic. The budgets for the last two fiscal years focused on the pandemic, which has subsided now. What do you expect from the upcoming budget?

The first thing I want to say is Bangladesh’s taxation system should be radically changed because it is not investment-friendly.

What areas of taxation do you want to see changes in and why?

Bangladesh’s population is over 177 million, but only around two million are under the tax net. That is why the National Board of Revenue (NBR) fails to meet the tax collection target. When that happens, NBR officials attempt to collect taxes from us, the businessmen, again.

But is it possible as per the law?

It is possible in Bangladesh, and we are the sufferers. All our taxation systems and laws contradict business. We, the businessmen, do not have enough ideas about laws.

When the NBR wants more taxes, it shows us a few laws and asks us to pay more. We then have to pay because if we take legal support, it will need more time and money. Where is the time to defend a case against the revenue board?

Did you or your organisation inform the authorities concerned of this problem?

We inform the finance and commerce ministries as well as other authorities concerned every year. They assure us of taking steps, but no big changes have happened so far. Some customs and NBR officials seek bribes from us. Some of them even harassed us without any reason. They did not have any illegal demand; they just harassed us. We want relief from all kinds of harassment involving VAT. 

We talked to high officials when we were harassed, and the problems were solved. But how many businessmen have access to high officials of the customs and NBR? This practice should be stopped now as Bangladesh’s business environment is deteriorating gradually.

We have another issue. The government provides us with cash incentives to promote exports. These are not profits, just subsidies. But the NBR has imposed a 10 per cent income tax on cash incentives. How funny! Subsidies and profits are never the same, but the NBR does not understand it.

You said Bangladesh’s business environment was deteriorating, but the government has so far allocated billions of taka to improve that. Has the initiative not been fruitful?

The government has allocated funds to develop existing projects or undertake new ones, which is necessary. But the problem is that the projects do not start on time. Most projects are not completed on schedule, with some taking an additional four to five years. That is why this development is not producing the desired result.

Besides, the government has undertaken some projects without pre-assessments. Take the Dhaka-Chattogram highway. The government upgraded it from two lanes to four. The project’s completion took extra time. 

But by the time it was completed, there was the demand to increase it to eight lanes. If the government did proper assessments initially, they would have upgraded it from two lanes to eight directly. This would have reduced costs and vehicles would have run easily.

Our exports are growing, but the port capacity is insufficient. We are facing a natural gas crisis. We have to take many licences from different authorities to set up a business, which needs extra time and money.

Bureaucratic complexities are a common problem here. We have to change if we want to develop our economy and create jobs. We have to understand that we will graduate from the least developed country status in 2026. After that, we will no longer be eligible for many facilities, including low export tariffs.

Manmade fibre (MMF) is now in fashion in the global clothing industry, but we lag far behind in this. Bangladeshi apparel exporters are now focusing on MMF, but the NBR has imposed duties on its raw materials. Why has the government imposed duties on petrochemical resources as we do not have that?

We [exporters] import machinery without duties. But if a machine breaks down and its parts are not working, we have to pay duties to import those. Is it fair? Who can predict how long parts will last?

The government has imposed a source tax on readymade garments. But when the NBR calculates total tax at the end of the tax year, the final amount is not based on source tax. Even if we face losses in business, the NBR does not return our money. Is it justice?

What is the current business environment in the country?

Compared to 10 years ago, doing business has become more and more difficult in Bangladesh. There are no areas in business where we do not face
barriers.   

The government has planned to take out bank loans to meet budget deficit. It is doing this regularly. What is your comment on this?

The government keeps deficit in the national budget to develop the economy. But I think the deficit amount is much higher in Bangladesh. If the government takes out a large amount of bank loans, it will directly affect private investment.

Now we are in the Covid-19 recovery period. Many new private investments have come, and they will need bank loans. If the government borrows a lot from banks, how will banks lend to private entrepreneurs while the share of private investment in our gross domestic product is very low?

How should the government meet budget deficit then?

I suggest the government reduce deficit and focus on widening the tax net. If necessary, it may reduce income tax rates and announce incentives to encourage people to pay taxes. I strongly believe a minimum of two to three crore people in Bangladesh could be under the tax net. But to widen the tax net, the government’s willingness is needed first.