Businesses’ major tax demands unmet

• Finance Bill- 2020 has been passed without any major changes
• Field-level officers have been empowered to inspect business houses, recover unpaid VAT and force businesses to come under VAT registration
• Conditions for investing untaxed money in the capital market are relaxed
• Conditions for availing rebates on raw materials were withdrawn
• Duty has been hiked on imports of industrial salt
• Tax coupon on zero bonds was scrapped for general public
• Consumers will have to spend extra on telecom expenses
• No relief from tax at source on exports

Businesses begin the new financial year on Wednesday with some of their key concerns to help the economy recover from the Covid-19 fallout going unaddressed.

Parliament passed the Finance Bill 2020 on Monday without considering most of the major proposals from the businesses. There were only a few tweaks to the original bill.

One of the concerns of the businesses, empowering lower rank tax officials for enquiry and enforcement, stays, which they think will create inconvenience for them.

They said withholding VAT will deprive firms of the benefit of the corporate tax cut as the effective tax rate will be higher.

Businesses had also demanded that the restriction on the allowable promotional expenses to 0.5 percent of turnover be withdrawn as it is not possible for all types of companies such as fast-moving consumer goods, telecom and pharmaceuticals, to run their businesses with this cap.

This proposal from the businesses was not considered in the finance bill.

The call for withdrawal of the additional tax on mobile phone use also went unaddressed.

Sheik Fazle Fahim, president of the Federation of Bangladesh Chambers of Commerce & Industries (FBCCI), said, "This is a humane and socioeconomic turnaround budget. The FBCCI proposals were on a macro level. We proposed the withdrawal of the entire 5 percent advance tax on all imports, but the government brought it down by one percentage point to 4 percent on only industrial raw materials."

"We also demanded that corporate tax be reduced to 25 percent in the next three years from the existing 35 percent. This year it was decreased by 2.5 percentage points," he added.

There are some issues related to VAT, they will resolve those after meeting with the departments concerned in the next three years, he said, adding sectoral tariff issues will also be addressed over the next few months.

From now on, field-level officers of the National Board of Revenue can inspect any business firms of manufacturing and service sectors and realise outstanding Value Added Tax (VAT).

If an assistant commissioner deems it necessary, he or she can also force a firm to register for VAT.

The businesses fear that it will be misused as it gives so much power to revenue officers and low-level assistant commissioners.

They complained the revenue officers were involved with various corruption and irregularities in the field level. The level of harassment will reach its peak as the amendment to the law gives them the power to become "arbitrary".

Shams Mahmud, president of the Dhaka Chamber of Commerce and Industry (DCCI) said, when field officers go on inspections with the consent of a commissioner, there is transparency in work due to a chain of command. The new provision empowers field officials with the possibility of harassment of traders."

The businesses had also opposed the provision of 20 percent advanced deposit required for appealing against tax claims before VAT commissioners and appellate tribunals. They had a proposal to amend it to 10 percent. But this provision was not amended as expected by the businesses.

The new Finance Bill has added a new sub-section in Section 83 empowering the revenue officers to inspect the place of production or supply or service place or business of the registered or non-registered person and inspect the inventory, services, materials and accounts. In this case, the revenue officers do not have to take the permission of the commissioner or the director general.

The NBR sources said the move has been taken with the intent to expand the tax net and reduce the workload of commissioners.

Finance Minister AHM Mustafa Kamal, in his concluding speech in the Parliament said this is an initiative to raise revenue through decentralisation of work.

If the revenue collection process is automated and there will be no scope for harassment, said an NBR official involved with the budget. So, there is nothing to fear about this law.

However, experts fear that the harassment will increase.

Former NBR chairman Mosharraf Hossain Bhuiyan told The Business Standard, "There are so many allegations against field officials. If the power of enforcement is given to lower rank officials, there will be a risk of abuse of power. Field officials should not be given this opportunity directly without the permission of a commissioner or a deputy commissioner."

He said the proposed budget needs some more changes. The additional supplementary duty on mobile phone services should be amended taking into consideration low-income people. It also would have been better not to hike the amount of advanced deposit on appeals, the former NBR chairman added.

The finance minister did make only a few tweaks to the Finance Bill.

The conditions for investing untaxed income in the capital market have been relaxed, with lock-in period revised down to one year.

The obligation to claim rebates on raw material within a year after importing those has also been revoked.

Taxes have also been withdrawn on investments made by anyone other than banks, insurance and financial institutions in the government's zero-coupon bonds.