The National Board of Revenue has scrapped the income tax exemption benefit for some factories located in the economic zones under the Bangladesh Economic Zones Authority to remove disparity among factories in the sectors located inside and outside the economic zones.
The NBR’s income tax department on May 10 issued a statutory regulatory order scrapping the benefit for factories in edible oil, sugar, atta (flour), maida (refined flour), cement, steel and steel product sectors located in the economic zones.
Initially in 2015, the revenue board offered a number of tax benefits, including the gradual reduction of the income tax exemption facility for 10 years, to the EZ factories.
As per the incentive scheme, investors enjoy full income tax exemption during the first three years of operation, 80 per cent during the fourth year, 70 per cent during the fifth year, 60 per cent during the sixth year, 50 per cent in the seventh year, 40 per cent in the eighth year, 30 per cent in the ninth year and 20 per cent in the 10th year.
Later in March 2019, the NBR barred the factories which had relocated to the economic zones from availing the income tax exemption facility.
Officials said that the previous changes could not remove disparity among the factories within the sectors located inside and outside the economic zones.
Investors in the sectors located outside the economic zones had also been demanding withdrawal of the benefits for the EZ factories as the benefits created imbalance in domestic industries within the sector, destabilised the market for the products and drove many businesses out of the market.
Factories outside the economic zones were not eligible for the benefits although both produced products for the domestic market.
A number of essential consumer goods producing companies, including TK Group, S Alam Group, Bangladesh Edible Oil Ltd and Globe, placed the demand before the NBR after their competitors such as Meghna Group and City Group started availing the tax benefit, including exemption from payment of advance income tax, under the scheme.
The NBR also feared that the government would lose a huge amount of revenue due to the exemption facilities given to the EZ industries involved in the production of edible oil, sugar, atta, maida, cement, steel and steel products to be sold on the domestic market.
On the other hand, some sectors such as the vegetable industries enjoyed tax holiday until 2003 and are now self-sufficient.
According to the latest SRO, the other conditions, including the bar on the relocation of factories to the economic zones from outside for availing the benefits, have remained unchanged.
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