More tax incentives to woo FDI on cards

The government is preparing its recommendations to make existing corporate tax and other tax incentives more attractive in order to attract more local and foreign investors into the country, said an official of the National Board of Revenue (NBR).

In line with Prime Minister Sheikh Hasina’s directives and minutes of the meeting held on October 10, the Principal Secretary Dr Ahmad Kaikaus is now preparing recommendations on fresh incentives for new foreign investors.

In this regard, the NBR is entrusted to take immediate steps to formulate a comprehensive strategy and future action plan to attract investors to Bangladesh as part of the trend of global relocations of companies particularly Japanese firms from China in the wake of the Covid-19 pandemic.

NBR has formed a high-powered committee to give recommendations to the government for attracting Foreign Direct Investment (FDI) to Bangladesh amid the present global trend of relocation of FDI mainly from China.

The NBR on September 10 formed the committee consisting of NBR members dealing with income tax policy, customs policy and Value-Added Tax (VAT) policy to make the recommendations mainly related to tax benefits.

The other members of the committee include customs policy member Syed Golam Kibria, VAT policy member Masud Sadiq and customs policy second secretary Mohammad Mehraj-ul-Alam Samrat. Officials said that Prime Minister Sheikh Hasina on August 20 directed all agencies concerned to take immediate steps to formulate a comprehensive strategy and future action plan to attract investors to Bangladesh. She made the directives at the 7th meeting of the governing board of the Bangladesh Economic Zone Authority (BEZA). Earlier on April 30 this year, the Prime Minister’s Office at a meeting with PMO Principal Secretary Ahmad Kaikaus in the chair took a number of decisions, including offering a set of tax benefits to attract investment relocation to Bangladesh.

Implying the uneven tax regime the prime minister also continued, "As a result, there is no culture of paying tax among business communities.” She also said that the revenue board will also calculate the loss incurred by the government for non-payment of tax to the government exchequer and the government will determine tax incentives to new investors in the country in comparison with the tax incentives of other countries.

The Prime Minister said, “Now, relocation of industries and attracting foreign investment from different countries are very important. She further said, "The corporate taxes in neighbouring India and other countries are low but other taxes and duties are high.” The Prime Minister said the government will take necessary to attract foreign investments.

The local investors will have to invest in the Economic Zones across the country instead of setting up firms on the fertile land earmarked for agriculture, she said.

In the last budget, Finance Minister AHM Mustafa Kamal eased the burden on the taxpayers due to Covid-19 pandemic. The tax rate for non-publicly listed companies has been lowered to 32.5% from existing 35%. Except for banks, leasing and insurance companies, mobile phone companies and cigarette manufacturers, tax rates for publicly traded companies and unlisted companies remains at 25 percent and 35 percent respectively since the fiscal year 2014-15.  The standard rate of VAT is 15%. Meanwhile, the applicable rate of VAT in case of import and supply is 15% and in case of export is 0%.

According to the Prime Minister’s Office meeting's minutes, Bangladesh's position is higher than its competitor countries like India, Thailand, Indonesia, and Vietnam in the World Bank Ease of Doing Business-2020 Index. Bangladesh is praised in the world economic labour index. India has allocated huge land for attracting foreign investors during Covid-19 pandemic. Its corporate tax has also been reduced to 22 per cent from 30 percent and the tax 17 per cent in the event of establishing new industries.  Besides, the corporate income tax and VAT is higher than Thailand, Indonesia, and Vietnam, according to the minutes.

Meanwhile, the NBR would also examine the existing tax benefits being offered to investors in general and to investors at the country’s EZs and Export Processing Zones (EPZs). The committee will also identify the probable tax benefits that can be offered to foreign investors for making investment in EZs and EPZs after analysing the impact of the benefits to investors outside the zones.

For example, India has further reduced the corporate tax rates and adopted a ‘Plug and Play Model’ to reap the China Plus One policy for foreign investors. Under the Plug and Play Model, the country will offer ready facilities in terms of building, utility connectivity, road connectivity and clearances required to launch the business according to the analysis, the minutes detail.

Bangladesh can also follow the Plug and Play Model as BEZA and Bangladesh Hi-Tech Park Authorities are developing EZs and parks with readymade land, infrastructure and other facilities. It identified a number of areas for extension of incentives, including reduction in corporate tax and VAT rates, to attract FDI and relocation of plants to Bangladesh.

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