The National Board of Revenue (NBR) has reduced the tax on the gross receipts of carbonated beverage manufacturers by two percentage points following investors' concerns about a sharp hike in their payable taxes.
The rate of turnover tax (as the minimum tax) has been lowered to 3.0 per cent from 5.0 per cent through a gazette, effective from Tuesday (August 29, 2023).
In the national budget for the current fiscal year, the income tax authority raised taxes on carbonated beverage manufacturers from 0.6 per cent to 5 per cent. After the imposition, the payable taxes of carbonated beverage companies surged by over 800 per cent, jeopardising their investment plans.
TIM Nurul Kabir, executive director of the Foreign Investors Chamber of Commerce and Industry (FICCI), praised the decision in response to the chamber's demands and the realisation of investors' problems.
"I welcome the decision, but the government could consider a slightly larger reduction as the tax incidence jumped significantly on the manufacturers," he said.
Investors would not be able to predict their cost of investment if taxes are sharply increased on them, he added.
Nurul Kabir said the government could consider gradually raising taxes on investors to allow them space to adjust to the changes in fiscal measures.
Previously, carbonated beverage manufacturers requested a modest increase and proposed a tax rate of 1.0 per cent, up from 0.60 per cent. The manufacturers sent letters to the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) and the NBR regarding the matter.
Industry insiders said despite the latest tax reduction, tax rates will still increase by three times compared to the previous payable taxes.
The turnover tax on tobacco manufacturers is 3.0 per cent and this same rate is now applicable to carbonated beverage manufacturers.
Carbonated beverage manufacturers pay corporate taxes and customs duties at their respective applicable rates. According to the Bangladesh Beverage Manufacturers' Association, the industry has an annual turnover of about Tk 80.00 billion ($900 million).
Some major market players have already invested around Tk 100 billion ($1.1 billion) in the beverage manufacturing industry. Currently, the local beverage sector employs about 350,000 people at production and distribution levels.
A paper by Snehasish Barua, a faculty member of the Institute of Chartered Accountants of Bangladesh (ICAB), reveals that an increase in turnover taxes would result in a loss of Tk 4.33 billion in government revenue collection from this sector due to a reduction in demand.
The NBR collected Tk 24.86 billion in taxes from the beverage makers last year.
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