The New Nation - Internet Edition

Pulack Ghatack

The Government, in its budget for 2008-09 fiscal, has offered long-term extension of tax-holiday facilities for the newly set up industries in a modified form ignoring the suggestions of World Bank (WB) and International Monetary Fund (IMF).

The facility will continue up to June 30, 2018, as a new industry established outside Dhaka or Chittagong by June 30, 2011 would be eligible for tax-holiday for next seven years. Tax-holiday period for an industry set up in Dhaka or Chittagong in July this year will end in July, 2013.

Tax-holiday facilitates reduction or elimination of taxes. Finance Adviser Dr AB Mirza Azizul Islam in his yesterday's budget speech said, "To encourage the entrepreneurs, the government has decided to continue its tax-holiday scheme for new industries set up between July 1, 2008 and June 30, 2011."

Keeping the existing sectors under tax-holiday intact, the Finance Adviser proposed to include agro-processing, diamond cutting, steel production from billet, jute industries, different units of textile sector, underground rail, monorail, telecom infrastructure except mobile phone.

A total of 999 industries at present are enjoying the facility, which was introduced as incentives for business investment in 1973-1975 fiscal and supposed to end in June this year.

Both WB and IMF had prescribed the government for an end to tax holiday to increase revenue earnings. But, the government continued the facilities considering its positive outcomes.

Tax holiday facilities in last two fiscal years have brought positive impact as production values were 30 times and export value 17 times more than the revenue losses due to the facilities, a study by the National Board of Revenue (NBR) revealed.

According to the NBR study, total revenue loss of the government was Tk 1,205 crore in the 2005-06 and 2006-07 fiscal years due to tax holiday.

The total products in the industries, which have been enjoying tax holiday facilities, is Tk 36,382 crore in the two-year period. Total export of the industries during the corresponding period was Tk 20,354 crore.

On an average the tax holiday-facilitated industries created 392 new jobs in 1973-1975, 1,267 in 1976-1981, 9,024 in 1982-1990, and 23,000 in 1991-1994.

The Finance Adviser has proposed to continue tax holiday facilities for the industrial units in Dhaka and Chittagong (except CHT) for five years and in other four divisions (Khulna, Rajshahi, Sylhet and Barisal) and CHT districts for seven years.

Industrial units in Dhaka and Chittagong (except CHT) will get 100 percent tax exemption for first two years (from the start of production), 50 percent reduction for next two years and 25 percent in the final year.

Industries in other divisions - Khulna, Rajshahi, Sylhet and Barisal, and CHT districts will get 100 percent exemption for the first three years, 50 percent for the next three years and 25 percent in the final year.

In a report, the IMF told the government tax holiday facilities reduce the equity and legitimacy of the tax system and contribute to the public's cynical attitude toward the tax system by eroding the civic responsibility to pay taxes.