Investors in Bangladesh’s economic zones may lose some fiscal benefits as the government moves to ensure level playing field for the others who have invested outside the EZs.
The budget for the upcoming fiscal year (FY) may impose taxes on import of capital machinery, vehicles and construction materials for the investors in the zones, officials said about the latest stance on tax-breaks offered as sweeteners to investors from home and abroad.
Import duty on capital machinery and vehicles for EZ might be imposed at 1.0 per cent while investors may have to pay duty- taxes at regular rates, instead of current concessionary taxing, on import of construction materials.
However, the National Board of Revenue (NBR) may reduce taxes on land lease for EZ industries for parity with the land lease for housing sector.
The value-added tax or VAT on land lease might be cut deeply to 2.0 per cent from the existing 15 per cent in the budget, the officials added.
Executive Chairman of BEZA Shaikh Yusuf Harun said the land developer of residential plots have to pay 2.0-percent VAT while it is 15 per cent for industries.
“We have demanded equal treatment. VAT should be lowered to 2.0 per cent from 15 per cent,” he said about their proposal for fiscal remedy in the next budget.
Earlier, the Bangladesh Economic Zones Authority (BEZA) had proposed that the NBR waive taxes on establishment of industries obtaining lease of land in the budget for the upcoming financial year.
The Authority has recommended amending the definition of Land Development Authority in the VAT and the Supplementary Duty Act 2012 to facilitate lease of government Khas land or private land for the economic zoning.
It said investors would not be willing to invest in an EZ if high- rated taxes persist on land lease of BEZA as the Authority sells the land to them for setting up industries.
The BEZA alleged double taxation on land transfers as land- development works in EZs are conducted by contractors as per Public Procurement Act and Rules and VAT is paid at a rate of 7.5 per cent on it.
To attract investment and popularise the economic zoning, the government fixed lower prices of land compared to that of land acquisition and development cost, BEZA said in a proposal to the NBR.
The BEZA deducts VAT on land-development cost. Imposition of 15-percent VAT, as set in the current budget, could be considered “double taxation”, it said.
There are no such taxes in neighbouring countries, including India, Thailand and Vietnam, on land lease of industrial sector.
Bangladesh would not be able to attract investment in EZ competing with those countries if cost of doing business remained high compared to those, the Authority said.
The BEZA governing board has approved the setting up of 97 EZs. Of them, 38 industries in 11 EZs have started production and 70 more are under construction. Development works of some 29 EZs are continuing. The EZs have attracted proposed investment worth US$25 billion so far.
The BEZA provides lease of land for 50 years to the investors by acquisition after development for setting up industries. It signs Land Lease Agreement (LLA) with the investors. Investors obtain registration of the LLA paying 4.0-percent income tax.
© 2023 - All Rights with The Financial Express