SME sector 'should enjoy lower tax rate, tax slab'

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FE Report
The small and medium enterprise (SME) sector should enjoy a lower tax rate and tax slab to help the sector grow on a sustained basis in the competitive market, said SME Foundation chairman Abdul Muyeed Chowdhury.
He stressed the need for reducing the VAT rate to 3.0 per cent from the existing 15 per cent for the SME sector.
'Especially, the handicrafts sector should get waiver of VAT for at least five years,' A. M. Chowdhury, a former chairman of the National Board of Revenue (NBR) said in a pre-budget discussion with NBR in the city.
He said lower tax rate does not mean lower collection. If the tax net is expanded by keeping the tax rate lower, more people will be interested to pay tax, he observed.
SMEs should get more emphasis as local entrepreneurs can establish such enterprises with much lower investment, he added.
There should be a considerable difference between taxes on finished goods and locally-produced goods for helping the SME sector to develop itself, he noted.
He also said the banking sector could be offered an additional tax benefit for financing the SME sector.
NBR chairman Abdul Mazid said: 'The government will strongly consider the suggestion to widen the difference of tax rates between those on finished and local goods for the sake of development of local industries."
He said the government will positively focus on the suggestions of the SME associations for fixation of tax rates on the basis of annual turnover of, and investment in, SMEs, reducing tax on LP gas cylinder.
Mazid stressed the need for more research and technological advancement for capacity building of the local industry.
"Both VAT payers and VAT officials should be educated properly," he said adding that the board has established a help desk to assist taxpayers on different issues.
The board is trying to help the taxpayers in matters of payment of tax without help of any middlemen, he said.
Research fellow of Bangladesh Institute of Development Studies (BIDS) Pratima Paul-Majumder, who represents from Women Entrepreneurs Association of Bangladesh (WEA), said: "The government could provide block allocation to ensure market access of SME products."
Around 7.0 million women are dependent on micro-credit who deserve tax incentives and sufficient disbursement of loans.
SME entrepreneurs sought 10 years tax holiday facility for 11 sectors under the SME, duty-free import of LP gas cylinder and central VAT registration facility.
The Federation of the Bangladesh Chambers of Commerce and Industry (FBCCI) director Manjur Ahmed said the government should conduct an analysis whether it earns more revenue from Advance Income Tax (AIT) or tax from overall production.
He said if the government waived tax from goods and commodities at the import stage, it should simultaneously be applicable at the local level.
bdnews24.com adds: Former NBR Chairman Abdul Muyeed Chowdhury suggested at the discussion meeting that the government should make the next budget aiming at expanding the tax net by cutting tax rates.
Furthermore, he observed that foreign direct investments (FDIs) were not beneficial to the economy.
"Revenue earnings will increase when more taxpayers are in the tax net as a direct result of cutting down the tax rates," Chowdhury said.
Stressing the importance of NBR officials' capacity enhancement, he said: "The field-level NBR officials lack in skills in carrying out their basic responsibility. They have to discharge their responsibilities honestly and sincerely."
"I don't consider FDIs to be beneficial for the country's economy at all though they may appear to be so, as FDIs harm the local industries, because most fiscal incentives benefit the foreign investors."
The NBR chairman Mohammad Abdul Majid said at the meeting: "The forthcoming budget will incorporate necessary governmental support for the development of the SMEs as they contribute specially to poverty alleviation and employment generation."
Abdul Majid said: "We want to create a taxation-friendly environment. Measures will be taken to ensure that the taxpayers volunteer to pay taxes without any harassment or intimidation. There won't be any obstacle to forging of improved relations between the taxpayer and the tax collector."