FBCCI seeks withdrawal of advance taxes for industries, exports

The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) has suggested various tax rebates, including the withdrawal of advance taxes for industries and exports, to speed up the economic recovery of the country. 

Stating that the economy has come to a standstill because of the dollar and energy crises as well as rising freight and insurance costs, the country's apex trade body also recommended a reduction in taxes at source for all export-oriented sectors, including readymade garments.

It has further recommended ensuring the tax-free supply of electricity, gas, and water to industries in the proposed budget for the upcoming fiscal year.

In addition, the organisation has sought the exemption of all types of value-added tax (VAT) and supplementary duty on the production and import of consumer goods, daily essentials, and services intended for low-income and poor individuals during periods of high inflation.

The FBCCI made the recommendations in a report sent to Finance Minister AHM Mustafa Kamal on Sunday, on the eve of passing the proposed budget for the fiscal 2023-24. The budget is expected to be passed in parliament on 25 June.

The FBCCI has said that micro, small, and many medium entrepreneurs lack the liquidity required to directly import raw materials and various goods, leaving them with no choice but to purchase from the open market at high prices. 

In such a situation, the apex trade body believes that it is crucial to establish an investment-friendly and productive import tariff level for all, including micro, small, and medium-sized enterprises, women entrepreneurs, and new industrial entrepreneurs, regardless of the importer.

The FBCCI has recommended the imposition of 1%-3% duty on the import of machinery, essential commodities, and raw materials that are not produced in the country and the waiver of all types of customs duty on the import of essential items and raw materials for poultry, dairy, and fish feed for the next five years.

The trade organisation has called for reverting the duty on cement clinker back to its previous level of Tk500 per tonne instead of the proposed Tk700. Additionally, it has recommended the withdrawal of the 2% advance income tax on the sale of cement.

FBCCI said to impose a minimum duty on the import of machinery and parts of membrance and blowers used in ETP of the textile industry and a 25% duty and 15% VAT on software imports to protect the domestic software industry.

The organisation has suggested raising the tax-free income limit from the proposed Tk3.5 lakh to Tk4 lakh in view of the current inflation.

It said traders are facing an increase in the cost of capital, and they are also required to pay advance tax during the import of raw materials. Moreover, administrative expenses are rising due to the delayed reimbursement of advance income tax.

"Therefore, we propose to withdraw advance income tax (AIT) and advance tax (AT). If these are withdrawn, production costs will decrease, product demand will increase, and sales will increase. As a result, the government will be able to collect additional revenue through VAT," said FBCCI President Md Jashim Uddin.

The organisation said the post-production coordination chain is breaking down and capital liabilities are increasing due to the inability to adjust advance tax and refund VAT deducted at source. This increases the cost, time, and hassle of doing business and creates unnecessary hurdles in the industrialisation process.

It has proposed a levy of 0.5% VAT, noting that currently 5% VAT is levied on supply at wholesale and retail levels, which has become a burden on business expenses.

The proposed budget proposes a tax at source of 1% on all exports, including ready-made garments. FBCCI proposes to reduce it to 0.5% and maintain it for the next five years. Besides, it has proposed to withdraw the income tax deduction on cash assistance given against exports.

According to the FBCCI, costs are increasing due to various rates of VAT and the deduction of tax at source at the rate of 4% in the case of suppliers of packing materials, including raw materials, to industrial establishments. That is why big industrial companies are starting production themselves instead of buying it from backward linkage. As a result, many backward linkage industries are closing down, and employment is shrinking.

Besides, it has recommended withdrawing the proposed 15% VAT on ballpoint pens.