The government is processing a bounteous package of incentives to attract private-sector investment under the public-private partnership (PPP) initiative -- the latest paradigm for bankrolling large development projects.
Official sources said the incentive package would be offered on several counts, including minimising tax burden, corporate tax relief, exemptions on VAT, customs duty and stamp duty, no cap on single-borrower exposure, and facility for repatriation of sales proceeds on non-resident equity investments.
The PPP office under prime minister's office (PMO) has framed a draft on the incentives and sought opinion from ministries and departments concerned before its finalisation.
The government introduced the PPP scheme in fiscal year 2009-10 and earmarked Tk 25 billion as budgetary allocation to start with. A PPP office was set up under the PMO in the same fiscal for the development of infrastructures under this latest development paradigm.
However, the office ran the first year sans any success. Various problems stood in the way, funding being the principal one. Though the government raised an allocation of Tk 30 billion during the FY 2010-2011, it could also not be utilised till the year that followed.
Until May last year, some 39 projects, involving US$10 billion, had been queued up for implementation in different sectors under the PPP arrangements. Among these projects, 30 are large-scale while four medium-sized and five small.
The incentive package on the anvil has proposed offering the PPP projects full exemption from corporate income tax for 10 years from the commercial operation or half the contract period, whichever is greater.
The current tax holiday provides exemption for 10 years at a climb-down rate: 100 per cent waiver in the first year and reduction to 10 per cent in the tenth year of operation.
It also suggests putting on offer corporate-tax exemption to PPP projects in rural areas or under-privileged population for 12 years. The current provision has no special mention for projects in rural areas.
The draft also proposed full exemption from capital-gains tax arising out of transfer of shares in PPP companies by any shareholder. Presently, 15 per cent tax is charged on capital gains from sale of shares of PPP companies.
It recommends full income-tax exemption on interest income of foreign lenders from PPP projects in Bangladesh. Presently, interest income earned by foreign lenders on their loans to projects in Bangladesh is taxable.
The package also offers full income-tax exemption, up to three years, for expatriate employees and consultants against present provision of charging 30 per cent.
To minimise tax burden on PPP projects the draft incentive package has offered full tax relief on preferred share dividend, 27.5 per cent corporate tax for banks, insurance companies and other financial institutions on their returns on investment in PPP companies against the current 42 per cent, full tax exemption on repatriation of royalties, technical know-how, and technical-assistance fees.
"Reinvested remittable dividend will be treated as new foreign investment if invested in PPP projects," the draft says.
It also offered exemption of the PPP companies from mandatory obtaining of insurance from Sadharan Bima Corporation. PPP companies will be able to buy insurance from outside of the country "without any restriction".
The draft rules also suggest that "the taka be allowed to be freely convertible into foreign currency in current account in order to meet international payment obligations of PPP companies".
It also proposed that PPP companies be permitted to raise local or foreign finances without restrictions, irrespective of whether any of the shareholders are foreign residents. A pre-agreed lending rate of six-month Libor plus 7.0 per cent will be agreed for PPP projects, it says.
The banks and financial institutions have to follow the central bank's circular on single- borrower exposure limit. The new package has suggested that banks and financial institutions should be given right to avoid the effect of the circular on case-to-case basis for PPP projects.
The PPP projects will be given domestic taka loans against specified overseas guarantees or collateral to facilitate their implementation and operations.
© 2024 - All Rights with The Financial Express
