Local manufacturers of motorcycles, refrigerators and air conditioners will have to face double taxation on their income from the next fiscal year as per a Statutory Regulatory Order (SRO) issued by the income tax wing under the National Board of Revenue (NBR).
It will be 20 per cent instead of the existing 10 per cent from fiscal year 2025-26, according to the SRO. Complete freezer, refrigerator, motorcycle, air conditioner and compressor manufacturing companies are subject to the revised rate. The 20 per cent tax rate would be valid until June 30, 2032.
The NBR has opted not to impose the tax from the day of issuance of the SRO following prospective tax measures, said officials.
"With the removal of the 10 per cent tax provision, the manufacturers of these items will fall under the regular tax rate of 27.5 per cent. But considering the survival of the manufacturers, the NBR has decided to implement a reduced rate of 20 per cent for the next seven years," said AKM Badiul Alam, a member of income tax policy.
Local manufacturers enjoyed a 5.0 per cent tax rate from 2009 to 2021 and are enjoying 10 per cent rate from 2021 until now, he said. "We have to meet the conditions laid down by International Monetary Fund."
Aminur Rahman Mithu, head of corporate affairs, Runner Group, said this kind of frequent policy changes could harm Bangladesh's branding in the international arena. Automobile industries are highly capital-intensive and require state-of-the-art technology, he said. "The government's failure to maintain continuity in the fiscal policies might send a negative signal to other investors," he said.
In the SRO, there are certain conditions for manufacturers to avail themselves of the benefit from the first day of their commercial production. The manufacturing companies must be registered under Company Law-1994, have the capacity to manufacture their own mold and dice, have facilities for waste management, polyurethane foaming plant as well as powder coating plant and obtain approval from the NBR.
Companies that are reconstituted or transferred or divided from another entity will not be eligible for the benefits.
S.M. Shoyeb Hossain Nobel, additional managing director of Walton Hi-Tech Industries PLC. (WHIPLC), has voiced grave concern over the government's sudden policy shift.
"Investors were supposed to enjoy the 10 per cent corporate tax rate until 2032 as promised by the government to encourage investment. Now, it is withdrawing the benefit when investors have responded to the offer," he said.
He warned that such policy shift may adversely affect the growth of GDP, employment rate and progress towards Sustainable Development Goals.
Mistrust would be created among the next generation businesses on any offer by the government to the investors, he said. "We have just started exporting our goods. Now, withdrawal of tax benefits has shattered our hope," he said. NBR officials, however, have claimed that the hike on taxes would have less impact on low-income people as most of the essential commodities remain exempt from taxes to contain inflation.
doulotakter11@gmail.com