Bangladesh FICCI concerned over budget provision raising tax burden

Contributions towards the WPPF are statutory payments for the benefit of employees that are paid from pre-tax profit as per the law, said the chamber.

However, it has been proposed to consider WPPF contributions as inadmissible expenses based on the idea that they are appropriations of profit after tax, such as dividends, according to FICCI.

"The benefits of a potentially business-friendly national budget could unravel unless some of the provisions are reversed," FICCI said.

"Such an imposition is inconsistent with the tax-friendly environment the government has been trying to build over the years and a diversion from the current provisions of the Labour Act," it was quoted as saying by Bangladeshi media reports.

FICCI recommended that allocations for the fund should be considered as permissible expenses under section 29 of the Income Tax Ordinance instead of inadmissible ones under section 30 as suggested in the proposed budget.

The growth of multinational companies operating in Bangladesh could slow down if certain provisions, such as those regarding the WPPF, are included in the national budget as they may discourage both domestic and foreign investment, FICCI president Naser Ezaz Bijoy said.

"As per the Labour Act, an individual is required to pay tax on it for amounts exceeding Tk 50,000 but on the other hand, 10 per cent of 5 per cent of the net profit should be contributed to the government welfare fund," he said. "So, imposing tax on WPPF contributions is basically taxing payments to the government," he elaborated.

He went on to say that the measure is identical to double taxation as both employees and employers would bear the burden.

"In addition, imposing this will create more challenges in the ease of doing business in Bangladesh," said Bijoy, chief executive officer of Standard Chartered Bank in the country.

FICCI also urged the government to change conditions related to the corporate tax benefits unveiled in the proposed budget. The government had proposed cutting the corporate tax rate by 2.5 percentage points for listed and non-listed companies.

However, firms will have to conduct most of their transactions through banks and mobile financial services to avail the benefit. They also cannot spend or invest more than Tk 12 lakh using cash.

"The law should allow companies that collect at least 50 per cent of their proceeds through banking channels to avail the benefit while the ceiling could be gradually increased by 10 per cent from next year," it said.

Naser opposed the government's bid to offer unquestioned amnesty to legalise undisclosed offshore properties and funds. "We disagree with the proposal from an ethical point of view," he said, adding the measure will encourage tax evaders.

Fibre2Fashion News Desk (DS)