A high rate of effective tax is driving away potential investors from the country and discouraging existing investors from going for expansion, speakers said at a dialogue on Thursday.
Despite the cuts in corporate tax rates, they said, the imposition of minimum tax, withholding taxes, especially at import stage, has caused a higher tax burden discouraging the investors.
Former bureaucrats and incumbent senior government officials, business leaders, economists, representatives from development partner organisations, and accountants made the observation at a dialogue on domestic revenue mobilisation at a city hotel.
Policy Exchange Bangladesh (PEB) organised the event with the support of IGC, funded by UKaid.
Dr M Masrur Reaz, founder and Chairman of PEB, moderated the dialogue titled 'Strengthening domestic revenue mobilisation for an upper middle-income Bangladesh'.
Dr Shamsul Alam, former state minister of planning, attended the programme as the chief guest and Md Amin Helaly, senior vice president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), was the special guest.
Former NBR members Md Farid Uddin, Chartered Accountant and Managing Partner of SMAC Snehashish Barua, and senior country economist of the World Bank Bernard Haven were the panelists.
Former chairman of the National Board of Revenue (NBR) Dr Nasiruddin Ahmed and Research and Policy officer of IGC Aminul Aman jointly presented a paper on "DRM in Bangladesh: Lessons from literature around the world."
Dr Shamsul Alam suggested lowering corporate tax rates to maximum 30 per cent, reducing tax exemptions, tax holiday, and separating tax policy formulation tasks from the tax collection wings.
"The Internal Resources Division (IRD) could be assigned for tax policy formulation while the NBR would be the tax collector," he said.
Dr Alam also suggested empowering the NBR chairman with enough authority and allowing the position to serve for at least four to five years.
Interfaces between the tax collectors and taxpayers should be developed to enhance revenue mobilisation, he said, pointing out that only the revenue mobilisation is lagging behind while other economic indicators are performing well.
WB economist Mr Haven said that effective implementation of the government's plans is necessary for attaining the goal and suggested that the government should gear up its efforts of automation and integration of income tax, customs and vat wings.
The revenue authority is squeezing the large taxpayers to mobilise higher revenue, he added.
He also suggested aligning the tax policy with global trade preference to pave the way for signing the Free Trade Agreement which is necessary before the country's graduation from the LDC status.
Abdus Samad Al Azad, Additional Secretary to the Ministry of Commerce, said many investors would not be interested in investing here under the existing tax policy. "Tax system is jeopardizing the country's potential investment."
Debabrata Roy Chowdhury. Director for Legal, Regulatory & Corporate Affairs and Company Secretary at Nestle Bangladesh, said higher effective tax rate is jeopardising the investors' plan to go for expansion.
He said inadmissible expenses are mounting pressure on the investors.
Mr Snehasish Barua said that a cashless transaction system with comprehensive digitisation is required for increasing revenue mobilisation through formal transactions.
He proposed framing separate policies for cottage, small and medium enterprises as they are not able to comply with the requirement like Document Verification System.
Former NBR member Mr Farid said that a political will is important for any type of reform. The NBR needs investment to bring fundamental reforms, he added.
Mr Amin Helali said the NBR takes measures hypothetically due to absence of data. To meet the target, taxmen put pressure on existing taxpayers, he alleged.
Finance Division Joint Secretary M Jahirul Quayum said the Ministry of Finance is ready to allocate funds if any comprehensive plan is provided on reform of the NBR.
Dr Masrur Reaz said that reengineering the business processes of the revenue administration is necessary to shift dependence on import taxes.
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