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BAPLC seeks removal of cap on promo expenses

Staff Correspondent | Published: 22:28, Aug 08,2020

 
 

The Bangladesh Association of Publicly Listed Companies has demanded removal of the cap on promotional expenses the National Board of Revenue imposed in the budget for the current fiscal year 2020-2021.

The BAPLC in a letter sent on July 12 to NBR chairman Abu Hena Md Rahmatul Muneem said that the provision of limiting promotional expenses up to 0.5 per cent of disclosed turnover would impact the corporate taxes paid by both private and publicly listed companies to great extent.

According to the provision inserted into the Income Tax Ordinance‑1984, any promotional expense exceeding the limit will be considered as inadmissible expense and will be taxed.

The association said that fast moving consumer goods and similar industries usually spent around 5 to 10 per cent of their turnovers as promotional expenses which was established locally and internationally as one of the key drivers of consumer goods sales.

The effective tax rate for non-listed companies will go up by 6 to 89 per cent and the effective tax rate for listed companies will go up by 5 to 69 per cent if the limit is not withdrawn, it said.

The cap will also give a wrong signal to potential foreign direct investors as it will increase the effective tax rate significantly and looks very unattractive compared with the neighbouring countries in attracting FDI, the letter signed by BALPC president Azam J Chowdhury.

More than 90 per cent of the activities run by the FMCGs and other industries will be reduced, hindering business growth significantly if they want to minimise the tax cost on promotional activities, it said.

Thousands of people employed to provide promotional goods and services will lose their jobs, it added.

As a result, the companies will be left with lesser funds for payment of dividend and future investment and ultimate investors’ earnings will decrease significantly, the association said.

‘The provision should be removed and all legitimate promotional expenses should be considered as allowable expenses considering the above mentioned grounds,’ it demanded.

NBR officials said that they had received the letter and would examine the issue.

They, however, said that the NBR might not be able to consider the issue as the provision was inserted in the law through the Finance Act‑2020 passed in the parliament.

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