Businesses miss out on tax cut due to restrictions: trade bodies

Top trade bodies including the Metropolitan Chamber of Commerce and Industry (MCCI) and Foreign Investors Chamber of Commerce and Industry (FICCI) have pointed out that businesses are unable to avail the corporate tax cut benefits outlined in the budget for the current fiscal year due to restrictions imposed on transactions.

During a pre-budget meeting with the NBR on Wednesday, they argued that the limit in place falls short of their financial needs as expenditure required by large businesses are way beyond the imposed threshold.

"Though the government reduced the corporate tax rate by 2.5% in the last budget, companies are unable to reap the benefits," MCCI President Saiful Islam said at the meeting held at the NBR office in the capital's Agargaon.

He also urged the government to cancel the condition of transactions through the banking channel and cut the use of cash, pointing out that 80% of the country's economy is still informal which requires transactions in cash, often over the allowable cap of 36 lakh for cash payments.

The FICCI, in a separate meeting, voiced similar concern.

FICCI president Naser Ejaj Bijoy said for a big company Tk36 lakh is not that big of an amount.

"It should be based on turnover," he said.

In the last budget, the tax rate of listed and non-listed companies in the stock market was reduced by 2.5% to 20% and 27.5% respectively.

However, to get this benefit, companies can make annual transactions up to Tk36 lakhs in cash, and any amount above that should be done through the banking channel. In addition, a single transaction limit was set at Tk5 lakh.

Snehasish Barua, representative of FICCI suggested allowable limits for cash payments can be gradually brought down to 0% after four years and in the first year the allowable cash payment limit should be 20%.

The MCCI president said, "Even though the tax rate of public limited companies is 20%, the effective tax rate in our country becomes 40-50%."

In the meeting, the MCCI put forth various proposals on behalf of businesses including 118 proposals regarding income tax, value added tax (VAT) and customs duty.

The MCCI president emphasised on reducing the tax rate of individual taxpayers, cancelling the condition on proofs of tax return submission, strengthening the online system, and NBR taking steps to expand local industries.

The FICCI pointed out that there is a huge gap between the registration price and the market price in the case of land registration, due to which undisclosed money is being generated.