The government is set to continue the tax holiday facility for new industries in a bid to attract more investment in infrastructure development. The tax holiday facility is scheduled to expire next month (on June 30). The National Board of Revenue (NBR) is strongly considering continuation of the facility by extending the deadline to 2011-2012 fiscal, tax policy member Aminur Rahman said. "The revenue board is mulling the option for the upcoming budget. It will however depend on the consent of the government high-ups," he said. The new law on direct tax is scheduled to be in place from 2012 and the tax holiday facility is likely to be continued up to that period, he added. In 2008-09 fiscal, the government extended the tax holiday facility by three years until 2011 to help the local industries remain competitive in the global market. Before offering the extension, the revenue board conducted a detailed study evaluating both positive and negative impacts of the tax holiday facility. A high-powered committee examined the impact of tax holiday it had on the national economy in previous years compared to revenue loss. In the study, the NBR said the government should increase the paid-up capital of industrial units enjoying tax holiday. It also recommended that installation of equipment for waste management in factories be made mandatory before granting the tax holiday facility to those. From the fiscal 2005-2007, a total of 999 industries had enjoyed the tax holiday facility causing Tk 12.05 billion loss in revenue, the report said. However, the total value of production of those companies was Tk 150 billion in 2005-06 and Tk 210 billion in 2006-07 fiscal. The government offered tax holiday facility to 89 industrial units and tourism businesses in 2005-06 while 30 units got the facility in 2006-07. Those units have invested Tk 120 billion and Tk 7.32 billion respectively in their factories. The committee estimated that the government incurred a revenue loss worth Tk 2.67 billion by offering the tax holiday facility, which was equivalent to 0.07 per cent of Gross Domestic Product (GDP). However, there is no study on the impact of tax holiday for 2008-10 period. Talking to the FE, Bangladesh Institute of Development Studies (BIDS) Director General Mustofa K Mujeri said a detailed study on the outcome of the tax holiday facility is needed to assess its necessity. "There are many factors working behind investment. Tax incentive is one of its components," he added. Only the tax holiday facility cannot lure investment without support of other factors like energy, he said. The government in 2009-10 budget introduced the 'reduced rate' aiming to replace the tax holiday facility for new industries saying that it is an impediment to the taxpaying culture. For industries located in Dhaka and Chittagong divisions (barring Rangamati, Bandarban and Khagrachhari districts) reduced tax has been fixed at 5.0 per cent for the first and second years while 10 per cent for the third and fourth years and 15 per cent for the fifth year. In Rajshahi, Khulna, Sylhet and Barisal divisions and Rangamati, Bandarban and Khagrachhari districts of Chittagong Division reduced tax will be fixed at 5.0 per cent for the first, second and third years, 10 per cent for the fourth, fifth and sixth years and 15 per cent for the seventh year.
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