Equal tax benefits for the emerging export-oriented industries in the country will yield fruits for the economy, according to sector insiders.
Like the garment industry, export earnings from the home textile, leather goods, jute, and agriculture industries have surpassed the $1 billion milestones in the first 10 months of the current fiscal.
The country's IT and pharmaceutical industries are also doing well with 20-25% growth. Moreover, plastic, toy and light engineering sectors have also shown promising results in the global market.
Entrepreneurs said the corporate tax cut prescribed in the proposed budget for FY2022-23 will be beneficial for all of these industries.
President of the Dhaka Chamber of Commerce and Industry (DCCI) Rizwan Rahman said, "We have been demanding equal tax benefits for all sectors for a long time. Some 7-8 sectors will be able to bring huge foreign exchange like the garment sector with bond and corporate tax facilities."
In the proposed budget, the tax rate of other export-oriented companies like readymade garments has also been reduced to 12% in a bid to enhance the competitiveness of Bangladeshi products in the world market.
And if a factory is environment-friendly, corporates will have to pay at 10% rate.
Sams Uddin Ahmed, a member of the National Board of Revenue, said, "The existing applicable tax rate for readymade garments is 12% for general factories, and 10% for green factories. All types of export industries have been given the same benefits now. This means they can invest anew."
However, entrepreneurs in several sectors are fearing a loss as the source tax on exports has been bumped up from 0.50% to 1%.
Abdur Razzak, president of the Bangladesh Engineering Industry Owners' Association, said the government has cut corporate tax. But, exporters will be in trouble due to an increase in source tax.
Light engineering is one of the eight emerging export sectors of the country. Although the industry, worth around Tk12,000 crore, was developed recently in the country, it did not do well in export due to a lack of incentives. At one time, it earned more than $600 million in exports but now the earnings have declined. The increased source tax might hurt the industry, said sector insiders.
SM Shafiuzzaman, secretary of Bangladesh Association of Pharmaceutical Industries, said "Unconditional exemption of the corporate tax rate on export earnings would play a vital role in the development of the pharmaceutical industry."
With a growth of about 25%, some 53 companies in the country exported medicines worth Tk1,800 crore last year. Our medicines are exported to about 142 countries of the world. This opportunity for corporate tax exemption will further enhance the development of Bangladesh's pharmaceutical industry in the global market, he said.
At present, Beximco, SKF, Incepta, ACI, and Square are also exporting Bangladeshi medicines to the US market. Square and ACI are also setting up factories in Africa and America.
According to officials of these organisations, the money that will be saved due to corporate tax exemption will create new investment opportunities.
Agro-processing sector has more potential
The agro-processing sector has surpassed the milestone of $1 billion in export earnings in the last financial year despite the coronavirus pandemic. Even in the first ten months of the current financial year, the agricultural processing sector has surpassed $1 billion in exports and is waiting to make another record.
Kamruzzaman Kamal, director (marketing) of Pran-RFL Group, the country's largest exporter, said entrepreneurs in the sector would be more encouraged by the corporate tax exemption.
He said the agro-processing industry has already established a strong foothold in the country's economy. Besides, this industry has also gained wide recognition in the world and Pran is leading this sector. We are now exporting to 145 countries around the world.
He commented that as a result of corporate tax cuts, big companies like ACI, Square, Akij, as well as small entrepreneurs will be able to grow.
Bangladesh is the second-largest producer of jute in the world, with annual production estimated at 1.349 million tonnes.
Jute is also the third-largest export sector of the country. Despite $1.17 billion in exports, the sector has been struggling for a long time due to various reasons.
According to jute traders, the benefits of corporate tax exemption will not be of much use to them as most of the companies in this sector are at a loss.
Mohammad Shahjahan, chairman of Bangladesh Jute Exporters' Association, said, "Around 95% of the country's jute exporters are at a loss, and the remaining 5% makes little profits. As a result, it is necessary to give a permanent incentive to this industry's entrepreneurs by formulating a policy for jute rather than giving corporate tax cuts.
The price of jute products did not rise as much as utility spending including electricity and gas have risen. As a result, it is not possible for anyone to do business now.
Dilip Kajuri, deputy managing director of Apex Footwear Limited, said, "Corporate tax exemption will not work for shoe exporters due to 1% source tax on exports."
At present, 70% of our total profits are gone for paying 0.50% source tax. If we pay 1% tax then we will have no profit. So, the corporate tax cut is not news for us, he said.