Business-friendly tax policies to spur industrialisation in Bangladesh
Thursday, 22 April 2010
Ferdaus Ara Begum
TAX policy should be business-friendly to help domestic industries grow faster and contribute to the development of the country. In Bangladesh, there have a series of policy reforms, which seem not enough to spur the growth of local industries. Locally produced products are facing steep competition from cheaper imported finished products.
Light engineering industries, boilers, medical equipment, particle board, glucose products, tar, carbon rod, DOP etc., are some of the finished and semi-finished products produced in the country. There are about 10-12 industries producing boilers competing with imported finished boilers, which enjoy favourable tax rates. There are about seven DOP producers supporting production of PVC, resin, electric cables, garden pipes, shoes and used as a raw materials for plastic industries. Duty structures should be rationalised so that these linkage industries can sustain competition from imported finished and intermediate products. Supplementary duties are one of the mechanisms to protect interest of local industries. Fixation of H S code is another cumbersome process creating tariff anomalies.
A comprehensive survey should be conducted to prepare a exhaustive list of raw materials, intermediate products used by the industries, which could be verified with the concerned association and can be cross-checked with the commissionrate of NBR. Sector specific tax policies can then be prepared to provide adequate support to the specific sectors.
Tax policies and structure needs to be transparent in Bangladesh. The government is trying hard to streamline the process and has been planning to revise VAT policies. In order to remove mistrust and restore confidence among tax payers and tax collector, transparency in maintaining tax collection is a priority.
Among the main features of taxation policies of Bangladesh, some common issues are; high tax rates and low tax base; complex procedure to pay taxes and lack of transparency, absence of voluntary compliance and relations between tax administration and tax payers. Tax payment and collection procedure have to be modernised and automated.
Tax payment procedures should be made as simple as possible so that tax payers are not harassed. The government should expand the tax net and at the same time reduce burden of tax on a very few number of people. Tax burden is ultimately shared by a limited number (7.5 Lac) of individual taxpayers and corporations.
Designing an appropriate taxation system is not an easy task. Tax rules have to be framed in such a way that they contribute to revenue generation and at the same time promote welfare in the society. Limit of tax exempted amount of income should be made rational. The taxable annual income in Bangladesh starts at Taka 1,65,000 or $2,384. For women and senior citizens it is at $2,681. At present a person having monthly income of Taka 13751/- is to pay tax. Cost of living is increasing day by day. Considering all these issues, it should be made rational. Tax exempted income of neighbouring countries can be followed. It is $3,477 in India, $2,601 in Pakistan, $2623 in Sri Lanka and $4521in Thailand. Policies should be framed for lowering tax base and expanding tax net. Capacity building of NBR is necessary, fresh recruitment in the NBR is needed.
Automation of Tax Paying System should be implemented in order to encourage tax payers to pay taxes. The government should be ready to deliver better services so that people are motivated to pay taxes.
Corporate tax rate is high. Because of high taxes, foreign companies may like to show less income. They will procure machineries and other project input through their subsidiary companies operating abroad where corporate rate of tax is relatively lower. On the other hand, high corporate tax for banks is also contributing to high interest rates. Corporate rate of taxes should be rational.
Tax holiday facilities can be extended as about 90% of our enterprises are SMEs. Innovative SMEs can be encouraged by providing tax holiday.
The writer can be reached at
E-mail: nothing_man2000@yahoo.com
TAX policy should be business-friendly to help domestic industries grow faster and contribute to the development of the country. In Bangladesh, there have a series of policy reforms, which seem not enough to spur the growth of local industries. Locally produced products are facing steep competition from cheaper imported finished products.
Light engineering industries, boilers, medical equipment, particle board, glucose products, tar, carbon rod, DOP etc., are some of the finished and semi-finished products produced in the country. There are about 10-12 industries producing boilers competing with imported finished boilers, which enjoy favourable tax rates. There are about seven DOP producers supporting production of PVC, resin, electric cables, garden pipes, shoes and used as a raw materials for plastic industries. Duty structures should be rationalised so that these linkage industries can sustain competition from imported finished and intermediate products. Supplementary duties are one of the mechanisms to protect interest of local industries. Fixation of H S code is another cumbersome process creating tariff anomalies.
A comprehensive survey should be conducted to prepare a exhaustive list of raw materials, intermediate products used by the industries, which could be verified with the concerned association and can be cross-checked with the commissionrate of NBR. Sector specific tax policies can then be prepared to provide adequate support to the specific sectors.
Tax policies and structure needs to be transparent in Bangladesh. The government is trying hard to streamline the process and has been planning to revise VAT policies. In order to remove mistrust and restore confidence among tax payers and tax collector, transparency in maintaining tax collection is a priority.
Among the main features of taxation policies of Bangladesh, some common issues are; high tax rates and low tax base; complex procedure to pay taxes and lack of transparency, absence of voluntary compliance and relations between tax administration and tax payers. Tax payment and collection procedure have to be modernised and automated.
Tax payment procedures should be made as simple as possible so that tax payers are not harassed. The government should expand the tax net and at the same time reduce burden of tax on a very few number of people. Tax burden is ultimately shared by a limited number (7.5 Lac) of individual taxpayers and corporations.
Designing an appropriate taxation system is not an easy task. Tax rules have to be framed in such a way that they contribute to revenue generation and at the same time promote welfare in the society. Limit of tax exempted amount of income should be made rational. The taxable annual income in Bangladesh starts at Taka 1,65,000 or $2,384. For women and senior citizens it is at $2,681. At present a person having monthly income of Taka 13751/- is to pay tax. Cost of living is increasing day by day. Considering all these issues, it should be made rational. Tax exempted income of neighbouring countries can be followed. It is $3,477 in India, $2,601 in Pakistan, $2623 in Sri Lanka and $4521in Thailand. Policies should be framed for lowering tax base and expanding tax net. Capacity building of NBR is necessary, fresh recruitment in the NBR is needed.
Automation of Tax Paying System should be implemented in order to encourage tax payers to pay taxes. The government should be ready to deliver better services so that people are motivated to pay taxes.
Corporate tax rate is high. Because of high taxes, foreign companies may like to show less income. They will procure machineries and other project input through their subsidiary companies operating abroad where corporate rate of tax is relatively lower. On the other hand, high corporate tax for banks is also contributing to high interest rates. Corporate rate of taxes should be rational.
Tax holiday facilities can be extended as about 90% of our enterprises are SMEs. Innovative SMEs can be encouraged by providing tax holiday.
The writer can be reached at
E-mail: nothing_man2000@yahoo.com