Tax holiday won’t benefit SMEs

Small industries have almost collapsed due to the Covid-19 crisis. In order to overcome this situation, the government promised to take measures to protect the existence of small and medium enterprises in the budget of 2021-22, but there is no real good news for them in the proposed budget.

The big companies will enjoy the benefits of corporate tax cuts and tax holidays in the proposed budget. Even the exemptions given in the case of import duty will not benefit the marginal entrepreneurs, because they mostly manufacture products with domestic raw materials. Therefore, cottage, small and micro industries will not get any benefit from the proposed budget.

Most of the small and medium enterprises most affected by the Covid-19 are on the verge of closing down. Their production and sales have all gone to the bottom. A greater part of the SMEs are suffering losses, so they do not have the opportunity to enjoy the benefit of tax exemption on profits.

The small industries sector will gain nothing from the proposed budget. It is termed a "business-friendly" budget, considering the issue of protecting the interests of large companies. Medium-sized companies are also owned by large industrial groups.

Companies with paid-up capital of up to Tk30 crore are covered by SMEs. The big companies have many subsidiaries with a paid up capital below Tk30 crore, so they are enjoying all relaxations of rules and the incentive package announced for SMEs.

It will not work for marginal entrepreneurs unless there is a separate incentive for companies with less than Tk10 crore paid-up capital or additional benefits in the budget.

Trade VAT imposed on wholesale and retail business is in fact a kind of sales tax. However, when the VAT system was introduced, it was clearly announced that the existing sales tax and excise duty would be abolished and a modern tax system called VAT would be introduced.

Buyers' purchasing power has declined at an unusual rate during the Covid-19 crisis. On the other hand, commodity prices have risen due to trade VAT. Although it was recommended that the authority stops the VAT collection in this sector for the next two years, it is not reflected in the budget.

Apart from the slackened condition of the economy due to the Covid-19 pandemic, many small industries are closing down due to unequal competition.

Although there is a "Competition Act, 2012" in our country, it has no application. Taking advantage of this, big industries are also marketing plastic mugs, breads, chanachur, jhalmuri (spicy puffed rice). In many countries, including India, such activities of large companies have been banned to protect the interests of small and marginal entrepreneurs.

In order to preserve the existence of small-scale industries in the country, it is necessary to take immediate actions, including full implementation of the Competition Act, to stop the production and marketing of such products by large industrial groups.

Md Ali Zaman, President, SME Owners Association of Bangladesh