On Monday, 29 June 2020, three major business bodies – the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI), Dhaka Chamber of Commerce and Industry (DCCI) and Business Initiative Leading Development (BUILD) made a plea seeking the deletion of particular new provisions in the VAT and income tax law to salvage them in the COVID-19 affected economy.
The business leaders highlighted seven specific areas in the budget that would increase the financial burdens on businesses while making doing business more expensive alongside penalize compliant businesses. The business bodies said the restriction on Input VAT rebate on legitimate business expenditures is totally against the basic principle of VAT. They also sought relaxation of the restriction on allowable promotional expense which has been limited to 0.5 per cent of turnover explaining that is a legitimate business expense.
This expenditure is integral to the business model for sectors like Fast Moving Consumer Goods (FMCG), telecom, pharmaceuticals, etc. It will lead to large disallowance and an increase in tax liabilities. There is also the fear of an increase in the price of products due to an increase in taxes. Hailing the reduction of corporate tax will give little or no benefit because of high source tax rates. The business bodies made an appeal to rationalize the tax deducted at source or advance income tax by reducing it from 5.0 per cent to 3.0 per cent and from 10 per cent to 6.0 per cent.
