The Foreign Investors' Chamber of Commerce and Industry (FICCI) said the proposed budget will increase the burden of tax for those who are paying taxes as per rules and comply with the relevant laws and regulations.
The organisation noted that the effective tax rate for such companies will not decrease but rather increase due to a number of reasons, including difficult requirements for corporate tax cut and not allowing tax-free workers' profit participation funds (WPPF).
"If these issues are not amended in the final budget, it will have a reverse impact. Even if the tax is reduced by 2.5% (for the corporations), in reality it will increase for those companies," said FICCI President Naser Ezaz Bijoy at a press meet on the proposed budget at a Dhaka hotel on Wednesday.
The organisation called for ensuring consistency and a long-term roadmap regarding tax-related rules.
Former FICCI president Rupali Chowdhury said, "We are saying that foreign direct investments are not coming to the country, but at the same time, the pressure of taxes on the companies complying with rules is increasing. What will the investors think when they hear of it?"
She urged the authorities not to impose additional taxes on the companies that are rules-compliant.
"The changes made in tax-related rules every year by the National Board of Revenue are having a negative impact on the investment plan. We have a five-year investment plan. What will happen to us? The policy needs to be consistent," said Rupali Chowdhury, who is also the managing director of Berger Paints.
Illustrating her point, she said, "VAT was not to be levied on land for investments made under the Bangladesh Economic Zone Authority (BEZA), but after our paying three instalments, the authorities have been asking us to pay VAT for it."
Regarding the WPPF, Shehzad Munim, managing director of British American Tobacco Bangladesh, said, "If we – the people of this country – do not understand, then how will the foreign investors understand the tax rate here? Others (new investors) will not come if the tax rate goes up."
According to the labour laws, companies have to keep 5% of their profits in WPPF, which has not been taxed so far. The proposed budget plans to bring these funds under the tax net. In other words, the companies have to pay tax on those expenses to comply with the labour laws.
"It is mandated in the labour laws, but now it is being considered as a dividend too. In other words, you have to pay tax for the expenditure in that fund. This is a big issue for organisations that comply with rules," said Naser Ezaz Bijoy.
According to Snehasish Barua, partner of Snehasish Mahmud and Company and consultant of FICCI, the tax on WPPF will increase the effective tax rate of an organisation by about 6%.
Regarding the proposal on making transactions of over Tk12 lakh through banking channels mandatory for corporate tax cut, the FICCI leaders said companies which have to transact thousands of crores of taka cannot fulfill this condition because the country's economy is still dependent on small and medium enterprises.
The organisation also urged the authorities to implement the measure gradually with adequate preparations.
Moreover, the FICCI opposed the proposal for giving amnesty for bringing laundered money from abroad back into the country.
The FICCI president said those who pay taxes here will have to pay 20% more than those who will bring back laundered money. This will discourage taxpayers who comply with the rules.
The FICCI, however, expressed its satisfaction regarding some of the measures proposed in the budget.
Padma Bridge to boost investment in southern region
British American Tobacco Bangladesh Managing Director Shehzad Munim expressed his hope that the Padma Bridge will have a positive impact on investments in the country's southern region, just as the Bangabandhu Bridge over the river Jamuna has had a positive impact on the northern region.
"We will highlight the potentials to all the investors," he said.
The FICCI president said, "After the Padma Bridge opens, travel time to and from the southern districts will decrease and investment in those areas will increase. It will be a bold statement by Bangladesh."
Zaved Akhtar, managing director and CEO at Unilever Bangladesh Ltd., Deepal Abeywickrema, managing director of Nestle Bangladesh Ltd, Sazzad Rahim Chowdhury, CFO of Berger Paints Bangladesh Ltd, and TIM Nurul Kabir, executive director of FICCI, among others, were present on the occasion.