Income tax waiver the government offers economic zones-based manufacturers of essential commodities and some other products may go if the products are produced for the domestic market, officials said.
The National Board of Revenue has already sent a summary of the proposal on withdrawing of the tax waiver facility being enjoyed by the factories located in the EZs and involved in production of a number of products such as edible oil, sugar, pulse, atta, flour, cement and MS rod for the domestic market.
The revenue board sought a decision on the proposal from finance minister AHM Mostafa Kamal.
The existing tax waiver facility that includes income tax holiday for 10 years and exemption from payment of advance income tax on import of raw materials, however, will remain in place for export-oriented industries, NBR officials said.
They said that the revenue board made the decision as the benefits had created a disparity between the companies from same sectors located in and outside the EZs under the Bangladesh Economic Zone Authority.
The benefits have also posed a severe threat to revenue collection due to misuse of the benefits by factories located in the EZs, they said.
There are also allegations that EZ industries from the sectors were misusing the tax waiver benefits and availing the facility for their other factories which are located outside EZs through certificates issued by the BEZA.
The NBR also lost huge amount of revenue from the companies from which it received taxes when those were outside the EZs.
The tax waiver facility has also posed a threat to the stability of the market of the products by driving many businesses out of the competition as EZ industries are in advantageous position as their cost of production and prices of products are lower than those of their competing non-EZ industries due to the tax waiver benefits, they added. Till now, almost all of the factories in the sectors are located outside the EZs.
Earlier on July 16, the NBR held a meeting with the BEZA and other agencies concerned to discuss the issue. NBR officials said that a number of essential consumer goods producing companies including TK Group, S Alam Group, Bangladesh Edible Oil Ltd and Globe had also requested the NBR to remove the disparity for the sake of fair competition in the sector.
The NBR had already neutralised the disparity between the EZ and the non-EZ edible oil producers by withdrawing AIT on import of raw materials, including refined and crude edible oil, for millers located outside the EZs.
Currently, Meghna Group, City Group and some others are availing the tax waiver benefits for their factories, mainly for edible oil, located in their own EZs approved by the BEZA. Another two or three manufacturers of different products including cement have applied to the NBR, seeking the benefits.
Officials said that tax exemption was usually given to export-oriented industries and to those domestic industries in which the government wanted more investment.
But these sectors have already become self-sufficient in production and achieved peak of investment, and most of which enjoyed tax exemption at their initial stage of development, they said.
Offering tax exemption again to those industries which once enjoyed such exemption is against the spirit of income tax collection, they added.
Earlier in 2015, the revenue board offered income tax holiday at gradually reduced rates for 10 years, including full exemption for first three years of commencement of commercial production, to factories located in the EZs.
There is no advance income tax on import of raw materials for the factories.
The factories have also been enjoying some other benefits including exemption from duties, taxes and VAT at various level of import, production and marketing of their products.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Tax