3 trade entities seek withdrawal of cap on promo expenses

Staff Correspondent | Published: 22:46, Jun 29,2020


The Metropolitan Chamber of Commerce and Industry, the Dhaka Chamber of Commerce and Industry and Business Initiative Leading Development on Monday demanded withdrawal of a number of provisions related to income tax and VAT from the proposed budget to maintain a business-friendly tax regime in light of the COVID-19-induced economic situation.

MCCI, DCCI and BUILD issued a joint statement saying that there were specifically seven measures, including restriction on allowable promotional expense to 0.5 per cent of turnover, in the budget which would impede businesses from going forward.

The provisions will increase financial burdens on business, make doing business more difficult and expensive and also penalise compliant businesses, the organisation said.

‘We urge the authorities concerned to review and rectify these measures in the interest of the continued economic growth of Bangladesh,’ said the statement signed by MCCI president Nihad Kabir, MCCI president Shams Mahmud and BUILD chairman Abul Kasem Khan.

The measures include restriction on allowable promotional expense to 0.5 per cent of turnover, restriction on input VAT rebate on legitimate business expenditure, reintroduction of extensive withholding VAT.

The trade organisations also mentioned that introduction of consumption-based input rebate and doubling of disputed VAT payable on appeal would be detrimental for businesses.

The government, however, on Monday withdrew the provisions while passing the Finance Bill-2020 in the parliament.

In the statement, MCCI, DCCI and BUILD said there should not be any restriction as it was a legitimate business expense.

This expenditure is integral to the business model for many sectors, like fast moving consumer goods, telecom and pharmaceuticals, and such restriction will lead to large disallowance and increase in tax liabilities which is unjustified, it said.

There is also the fear of an increase in the price of the products due to increase in taxes, it added.

It also said that reduction of corporate tax rate for non-listed companies would give little or no benefit because of high advance income tax and tax deduction at source rates.

The entities appealed for rationalisation of TDS and AIT rates to 3 per cent and 6 per cent respectively from the current 5 per cent and 10 per cent respectively.

They also demanded withdrawal of tax on gratuity income which come from unapproved gratuity funds.

They also said that restriction on input VAT rebate on legitimate business expenditures was totally against the basic principle of VAT.

As long as there is a legitimate business expenditure, whether revenue or capital in nature, input VAT rebate should be allowable against that expenditure, they said.

Otherwise, this becomes a tax in the nature of sales tax, and does not remain a value added tax.

The statement said that almost every sector of the economy from telecom to housing to transport to FMCG had seen collapsing demand due to the COVID-19 fallout.

Under the circumstances, the only option for policymakers is to spur growth in as many sectors as possible, it said.

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