Cap on company promotional expenses to be relaxed

Highlights:

• The proposed additional supplementary duty on mobile phone use will be withdrawn
• Limit of companies' promotional expenses is going to increase
• Advanced deposit needed for appealing against tax claims to the High Court is returning to 10%
• The time limit for claiming VAT rebates on raw materials will be canceled
• The six-day deadline for submission of the bill of entry will be scrapped
• Power of field officers of the National Board of Revenue will be lowered

The ceiling imposed on companies' promotional expenses may be increased as the proposed new budget may go through some changes before it is passed today.

Withdrawal of additional supplementary duty on mobile phone services and scrap of the time limit for claiming VAT rebates on raw materials are among few other amendments revenue officials are expecting.

An NBR official involved with the budget said they had received a lot of amendment proposals from economists and businessmen.

They have also received 51 amendment proposals from the discussions of lawmakers since the budget was placed in parliament on June 11. However, given the revenue collection target, they are not accepting more than 10-12.

The government will implement the fiscal policy for the fiscal year 2020-21, beginning on July 1, by passing the budget on Monday (today).

The proposed budget will be passed after the concluding speech of Prime Minister Sheikh Hasina.

Although economists and business people have proposed amendments to the budget on many issues such as allocations for the health sector, corporate taxes, Value Added Tax (VAT) on the local automobile industry, excise duty on bank deposits, an increase in mobile phone use tax and tax at source on exports, no major change is coming.

A revenue official told The Business Standard, "The newly-imposed 5 percent supplementary duty on mobile phone use is going to be scrapped at the behest of the prime minister as it directly affects people. A few more changes regarding technical issues are also coming in the light of the demands from the traders. "

In this year's budget, the finance minister had proposed increasing the supplementary duty on telecom services to 15 percent from the existing 10 percent. It has come into effect immediately after the announcement of the budget. But the imposition of additional supplementary duty has drawn sharp criticism at the consumer level. The government is now going to scrap its plan to raise the duty.

Although the companies' promotional expenses were tied to 0.5 percent of a company's turnover in the proposed budget, the government is also moving from it, and the limit may be set at 1 percent, according to sources.

Traders fear that if the promotional expenditure is limited to 0.50 percent, pharmaceutical, IT, multinational and new companies will face a huge tax burden.

All businesses, including the Federation of Bangladesh Chambers of Commerce & Industries (FBCCI) and the Foreign Investors' Chamber of Commerce and Industry, have protested the move.

Another area that may see change is an advanced deposit required for appealing against tax claims before VAT commissioners and appellate tribunals. The finance minister has proposed increasing it from 10 percent of the disputed amount to 20 percent. In the face of demands from businesses, the additional amount might be withdrawn.

Sheikh Fazle Fahim, president of the FBCCI, said raising the advance deposit for VAT appeals from 10 percent to 20 percent will block a significant amount of working capital of traders. As a result, many will lose capital. Many people will not go to court for fear that this money will be stuck in the court for a long time.

In changes to another provision of the VAT law, it has been proposed that businesses will not be able to claim VAT rebates on the whole amount of raw materials purchased at a time.

They will be able to claim rebate proportionate to sales and uses of raw materials which are used to make products and will be required to seek rebate on inputs in four months. This is also going to be withdrawn. As a result, if a trader buys materials at Tk100, he will get the full refund.

Besides, the obligation to submit the bill of entry within six days at the import stage also can be cancelled.

In the proposed budget, an NBR revenue officer was given the authority to conduct drive at different business houses and fine them and demand VAT. Earlier, it was up to the level of a deputy commissioner.

Traders feared that giving this power to everyone has created an opportunity for harassment of the traders.

NBR sources said the approval of the commissioner is being made mandatory by making changes here.

While talking about this, Fazle Fahim said, "Harassment of traders will increase a lot by giving such an opportunity to the field-level officials for valuation. Earlier, the process was somewhat transparent as officers up to the deputy commissioner had the opportunity to do so."

Regarding the rebates, he said, "The proposed provision of not offering rebates on raw materials after four months would have greatly increased the costs of doing business. Due to various problems, imported raw materials cannot be used at the scheduled time. Many people also stockpile raw materials in the hope of profits."

Six recommendations of Bangladesh Tariff Commission

The Bangladesh Tariff Commission has made several recommendations for the final budget to protect and make local industries competitive.

The agency said the government has lifted tariffs on imports of face shields after the coronavirus outbreak. However, tariffs on raw materials for production of face shields have not been reduced. As a result, the country is facing an unequal competition among producers.

The period of VAT exemption on domestic production is coming to an end on June 30. The commission has proposed extending it for another year.

In the current fiscal year, VAT has been levied on the import of edible oil, production and supply, which was earlier imposed only on imports. The Tariff Commission has proposed charging VAT and advance tax at the same rate for the next financial year.

The agency said because of the imposition of VAT on edible oil, if oil prices rise in the global market, their VAT-related costs will increase, resulting in suffering for consumers.

A 10 percent duty has been imposed on imports of sodium sulphate, which is used as an industrial salt, to protect domestic industries. However, raising the price of salt by only Tk1 per kg will not achieve the objective, the Tariff Commission has recommended increasing it to 89 percent.

"We have sent a letter of recommendations, considering the protection of the domestic industry and the market situation," a spokesman for the Tariff Commissioner told The Business Standard adding that if these recommendations are implemented, both consumers and producers will benefit.